European regulators have proposed robust new capital necessities for insurers holding cryptocurrencies, signaling the EU’s hardest stance but on Bitcoin and different digital belongings.
The European Insurance coverage and Occupational Pensions Authority (Eiopa) has beneficial to the European Fee that insurers impose a 100% capital requirement on all crypto belongings.
The transfer goals to discourage insurers from investing in digital belongings, because the U.S. takes steps to loosen restrictions on crypto belongings for conventional monetary establishments. Presently, most EU insurers allocate capital equal to 60% to 80% of crypto belongings, however the proposed rule would mandate full protection and considerably enhance the price of holding digital belongings.
Eiopa’s proposal goes past cryptocurrencies reminiscent of Bitcoin and Ethereum, concentrating on stablecoins pegged to fiat currencies and different tokenized belongings backed by conventional investments reminiscent of debt or equities. It marks the primary time the regulator has imposed such extreme capital necessities for any asset class held by insurers.
Regardless of the robust stance, the influence of the proposed guidelines is anticipated to be restricted within the brief time period. In line with Eiopa, European insurers held round €655 million price of crypto belongings on the finish of 2023, lower than 0.01% of their complete €9.6 trillion in belongings. Nearly all of these belongings have been concentrated in Luxembourg, suggesting oblique publicity via funding funds slightly than direct possession.
*This isn’t funding recommendation.
