Yesterday the European Parliamentās Economics and Monetary Affairs CommitteeĀ approvedĀ a draft law to implement the Basel III rules on banking capital and liquidity requirements. Included in the draft legislation is a single clause relating toĀ crypto assets, requiring a euro of balance sheet capital for a euro of every crypto asset held.Ā
This particular requirement is an interim measure intended to run until the end of 2024, as the European Commission was requested to present more detailed proposals by June 2023.
Because the full coverage of crypto-assets as proposed by the Basel Committee has not yet been addressed, the abridged treatment has some issues. The proposed 1250% risk weighting for crypto assets (the 1-for-1 capital clause) refers to ācrypto assetsā without defining the term.Ā
āMore work is still needed on the crypto assets proposal to better define its scope to ensureĀ tokenised securitiesĀ are not captured,ā said Caroline Liesegang, Head of Prudential Regulation at industry body AFME.
TheĀ final Basel proposalsĀ on crypto assets allow tokenized securities to have a conventional risk weighting in most cases. The timing matters because theĀ DLT Pilot regimeĀ that covers tokenized securities comes into force in March.
Weād argue that another potential issue is what one defines as āexposureā. For months until the final Basel proposals were announced, banks fretted thatĀ crypto custody was considered as exposureĀ and might be subject to the one-for-one capital requirements. However, the Basel Committee clarified this was not its intention.
Additionally the draft law requires disclosure of crypto-asset related activities including those defined by the MiCA legislation.
The document used for yesterdayās vote has yet to be formally published. Thereās still a way to go before the draft legislation is adopted because the European Union (EU) has its cumbersome trilogue process in which the Parliament, European Council representing the member states, and the European Commission come to an agreement before a final vote. Hence AFME suggested the crypto asset definition might be ironed out during that process.
The timing of any final vote and when the legislation might come into force is not yet clear.
The legislation also includes environmental, social and governance (ESG) impact when assessing bank risks.

















All whileĀ Pfizerāa company with aĀ $2.3 billion criminal fineĀ for fraudulent marketing, bribery, and kickbacksāwas given blanket immunity from liability andĀ billions in taxpayer dollarsĀ to produce a vaccine in record time with no long-term safety data.


