The European Union’s insurance coverage watchdog is proposing a stringent new rule that may require insurers to keep up capital reserves equal to the complete worth of their cryptocurrency holdings.
The advice, made by the European Insurance coverage and Occupational Pensions Authority (EIOPA) in a technical report back to the European Fee on March 27, goals to defend policyholders from the volatility and dangers related to digital belongings.
EIOPA described the measure as a essential safeguard, citing the excessive volatility of cryptocurrencies like Bitcoin and Ether.
“EIOPA considers a 100% haircut in the usual formulation prudent and acceptable for these belongings,” the company said.
EU’s Crypto Capital Rule Far Stricter Than Necessities for Shares and Actual Property
The proposed requirement is significantly more durable than capital requirements for conventional belongings—shares, for instance, require only a 39–49% capital cost, whereas actual property belongings are backed by solely 25%.
The advice fills a regulatory void between the EU’s Capital Necessities Regulation (CRR) and the forthcoming Markets in Crypto-Property Regulation (MiCA), as present insurance coverage legal guidelines lack clear directives for crypto publicity.
Circle submitted a brief response to EIOPA's session on capital necessities for investments in crypto-assets within the EU
EIOPA’s present draft recommendation proposes a uniform 100% stress issue on all crypto-assets, a way that overlooks the various threat profiles of various… pic.twitter.com/6mz54R0YcZ— Patrick Hansen (@paddi_hansen) January 20, 2025
EIOPA laid out 4 coverage choices for the Fee, in the end endorsing the third: a full 100% stress stage, indicating companies ought to put together for a whole lack of worth in crypto belongings.
“An 80% stress to the worth of crypto-asset exposures doesn’t seem sufficiently prudent,” EIOPA defined.
In contrast, a 100% stress stage assumes complete loss and guidelines out the advantages of diversification.
Historic information helps this method—Bitcoin and Ether have suffered worth drops of 82% and 91%, respectively.
EIOPA argues that this proposal wouldn’t impose extreme burdens on insurers, noting that crypto publicity amongst European insurers is minimal—simply €655 million or 0.0068% of complete trade belongings.
The regulator emphasised that the proposed rule would improve policyholder safety with out incurring materials prices.
EIOPA Flags Rising Curiosity in Crypto Regardless of Restricted Insurance coverage Publicity
Whereas crypto-related insurance coverage exercise is at present marginal, EIOPA acknowledged the rising curiosity in digital belongings.
Luxembourg and Sweden lead the area in crypto publicity amongst insurers, accounting for 69% and 21%, respectively, primarily based on This fall 2023 information. Eire, Denmark, and Liechtenstein spherical out the highest 5.
Many of the crypto publicity, EIOPA famous, is held via funding funds comparable to exchange-traded funds (ETFs) and is linked to unit-linked insurance coverage insurance policies.
Nonetheless, the authority cautioned that broader adoption of crypto belongings could, sooner or later, require a extra nuanced regulatory framework.
A latest survey by Bitpanda revealed a widening hole between European banks and rising investor demand for crypto providers.
Whereas digital belongings proceed to achieve traction throughout the continent, most conventional monetary establishments stay sluggish to adapt.
The Bitpanda survey discovered that regardless of rising curiosity in cryptocurrencies like Bitcoin and Ethereum, solely a small share of EU banks at present supply crypto-related providers comparable to custody, buying and selling, or staking.
Regulatory uncertainty and threat aversion stay key obstacles, even because the Markets in Crypto-Property Regulation (MiCA) framework begins to supply extra readability.
The submit EU Proposes Capital Rule Requiring Insurers to Totally Again Crypto Holdings appeared first on Cryptonews.