In January, the EU Parliament voted on legislation that includes plans to implement the Basel Committee rules for banks and crypto-assets, which imposes capital and liquidity requirements. On Friday, the EU published the wording used for the Parliamentary vote. It confirms that banks are expected to treat crypto-assets with a 1250% risk weighting as an interim measure until detailed legislation is implemented. That means they have to hold a euro in capital for every euro of crypto on their balance sheets.
It also highlights the problematic draft wording because the Basel Committee included tokenized securities in the term ‘crypto-assets’ but gave them a conventional risk weighting. Basel intended the 1250% risk weighting mainly to apply to cryptocurrencies, not securities, but the draft EU text fails to make this distinction. Hence the concern of the industry body AFME about the wording of the draft legislation.
There’s still time to remedy the wording because the EU Parliament has only made its first vote. The legislation now goes through a trilogue negotiation process between the Commission, Parliament and the European Council representing each country.
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