The Executive Committee of the European Union (EU) is urging (1) the European Banking Authority to expedite the adoption of stringent crypto capital standards for financial institutions that hold crypto assets. At the same time, the banking law is being drafted.
The executive stressed the rapidly approaching deadline agreed upon and added that Europe must decide to fulfill the target time. When the new law is finally enacted, it will serve as a guide for financial institutions that handle crypto assets.
The Basel Committee, which is comprised of monetary authorities from the world's largest financial hubs, is the organization that established the global deadline.
The date for establishing capital requirements for institutions that hold crypto assets, notably Bitcoin & stablecoins, has been agreed upon by the Bloc to be January 2025. The European Commission stated the following in an unofficial discussion paper that was seen by Reuters:
"Banks have said that they are interested in trading cryptocurrencies on their customers' behalf and providing other related services.
"From the view of international relations, it is also possible for the EU to completely align with the execution timeline that was agreed upon for the Basic level."
The European Union Wants to Fast-Track Crypto Capital Orders
The norms established by the Basel Committee are enforced by law within the European Union. Suppose the implementation of separate regulations for trading crypto assets in the EU is delayed until 2024. In that case, financial institutions may be required to wait even longer to obtain access to the cryptocurrency industry.
To get the crypto rules approved by the Basel Committee, the European Union can do one of two things. Either the Union will pass a brand-new law, or it will heed the call of the European Parliament and broaden the scope of the financial regulation being finalized. Neither option is acceptable.
According to the unofficial paper, the European Parliament and the states that make up the EU will soon start debating the definitive wording of the crypto capital rule for banks, which will ensure that all banks have the same rights.
In addition to this, the regulations can include obligatory provisions regarding Bitcoin, stablecoins, and various other crypto assets.
After that, banks will have particular orders that control their exposure to crypto assets. Concurrently, the new legislation addresses risks associated with financial institutions holding cryptocurrency assets.
From an external context, the report stated that the tight crypto capital regulations for banks will "enable the EU to align itself with the deployment timeline completely agreed on at Basel level."
Also, the earliest it would be conceivable to have a distinct draft of the law would be near the end of the year. In the meantime, elections for the legislature are scheduled to take place around the middle of 2024, making it more challenging to pass a new law in time for 2025.
The European Union (EU) also highlighted the possibility of coordination between the European Banking Authority (EBA) and the European Securities and Markets Authority.