ECB steps in as banks dip toes in crypto pool
LONDON — The European Central Bank (ECB) said on Wednesday it would harmonize how banks offer cryptoassets to ensure they have enough capital and expertise in a sector some European Union lawmakers have described as the Wild West.
Several crypto companies like Binance and Crypto.com have been authorized in EU countries such as Italy, France, Spain, Greece or Germany after complying with national safeguards to combat money laundering and terrorist financing.
This comes ahead of pan-EU licensing rules from 2023 at the earliest.
The ECB said banks were also considering whether to get involved in the crypto sector, but that national rules diverged quite extensively.
“In Germany, certain crypto activities are subject to a banking license requirement and to date, several banks have requested to be authorized to conduct these licensed activities,” the ECB said in a statement https://www.bankingsupervision.europa.eu/press/publications/newsletter/2022/html/ssm.nl220817_2.en.html.
“It is in this context that the ECB is taking steps to harmonize the assessment of licensing requests.”
The ECB, which directly regulates top euro zone lenders such as Deutsche Bank, UniCredit and BNP Paribas, said it would examine if crypto activities were in line with a bank’s risk “profile,” which determines how much capital to hold.
The ECB will also check if a bank can identify and assess risks from cryptoassets and if board members and IT staff have “robust experience” in the sector.
“Importantly, working closely with national supervisors, the ECB will strive towards greater consistency in prudential assessments across national regimes,” the ECB added.
Global regulators at the Basel Committee in Switzerland are assessing whether there should be specific capital buffers for holdings of crypto assets at banks.
The EU is also reviewing its bank capital requirements law.
Ville Niinisto, a Green Party member of the European Parliament, has proposed an amendment https://www.europarl.europa.eu/doceo/document/ECON-AM-735427_EN.pdf that bank holdings of bitcoin and other cryptocurrencies not backed by assets should not exceed 1% of a bank’s core tier 1 measure of capital.
Such a cap would need the backing of the full parliament and EU states to become law, a lengthy process.
Niinisto has also proposed regulators should assess if bespoke capital requirements are needed for blockchain, which underpins cryptoassets. (Reporting by Huw Jones Editing by Mark Potter)