Crypto bills continue to be crafted all over the world. Legislators aim to adopt the most comprehensive laws possible that take into account all the risks associated with the sector. They want to ensure the protection of investors and institutions that get into crypto. That said, lawmakers in Europe are getting ready to pass a new crypto law.
A bill to strengthen crypto rules for banks
Ahead of an inevitable adoption of crypto, legislators are trying to regulate the sector as well as possible. In this context, legislators in Europe getting ready to vote a new crypto law. The latter aims to strengthen ESG and crypto rules for banking institutions. Note that ESG rules are environmental, social and governance measures. Reuters announced the upcoming vote on the bill through a Twitter post on Jan. 23.
The bill stipulates that banks must reserve part of their capital to cover crypto holdings. It will force banking institutions to apply sufficient weighting to cover a total loss in crypto value. The amendment talks about a 1250% risk weighting equity to crypto exposures.
In addition, the bill proposes that a new regime “integrity and competencebe adopted. The system will be applied for the appointment of bankers. In this regard, the latter should besufficiently diverse in terms of age, gender, geographical origin and education“.
A wink for the banks?
At the same time, the amendment proposes a measure that should help banks manage ESG risks in the short, medium and long term. The latter is that institutions are required to remain aligned with their transition plans. Furthermore, the bill makes a requirement to the European Commission, which is the executive body of the EU.
This requirement is that the commission must publish an analysis report by June 2023. The document will analyze the possibility of introducing prudential limits regarding the exposures of official banks to shadow banks.
The bill implements elements of the global Basel III accord. The latter leads banks to take the necessary precautions to withstand market shocks without the help of taxpayers. In Europe, lawmakers are expected to vote on the new law this Tuesday, January 24. Once this is done, they will have to work out a final agreement with EU member states. Then, the new law can be rolled out to come into force in 2025.
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