The biggest fear of regulators, fueled by spectacular bankruptcies like the FTX exchange, is that the tumult of the nascent crypto industry is reaching the banking sector through current interactions. Also, they are trying to prevent this potential threat by imposing anti-corruption conditions on banking institutions tested by the consortium. A helpful context, we can say that they are having a field day, and especially on the European side where parliamentarians will never be around the topic of crypto like this past year.
The EU is adopting a series of tough regulations to shape crypto operations
Nothing escapes their sagacity and after Micah (with MiCA II already implemented), the most comprehensive control system in existence to date at the international level, TFR where cryptocurrencies “enjoy” a discriminatory bias in the articles about money transfers and draftspunitive crypto taxwhich can bring a lot of money to the EU budget, speaking with one voice for the 27 member states, are the banks that are in close contact with this dangerous class of assets that are in the hot seat.
To the credit of European parliamentarians, they are following the guidelines of the Basel Committee on Banking Supervision, a branch of the Bank for International Settlements (BIS) nicknamed “the bank of banks”, which recently published its prudential standards in this area..
So according to information on the 24th of January, the bill seeking to regulate the cryptographic activities of banks received a majority of votes in support. It will still have to receive the approval of the European Parliament before it can come into force.
Banks’ crypto exposure under high demand
Basically, The approved text states that the bank will have to use a risk weight of 1250%. In fact, this means that institutions will have to hold one euro of capital for each crypto euro held. They will also have to disclose their exposure to crypto assets and related services, as well as their risk management policy according to the recommendations already defined by the European Central Bank.
Unless I’m mistaken, it will now be more difficult for banks to control their exposure to cryptos. Because, even if no ban is issued, they face pressure to stay away and it is hard to see them venturing further into the industry.
In summary: initially, few of them got involved in this new asset class due to the lack of regulatory transparency; today, the more daring of them who have seen it as a growth spurt, will surely back down if they can’t meet the demands of regulators like that. he had warned her about the main actors involved.
So we can wonder about the future of this banking/crypto couple. Even if thanks to the reforms in the crypto market to remove its bad actors (we can still believe!) and the control of the verification of the truth removed its humiliation, we can assume a more peaceful relationship in a few years. As for whether it would be necessary, as long as the industry works through constant interaction between fiat and crypto, the answer is obvious.