Exaggerated over-reserves – When it comes to putting on sticks in the wheels crypto industry innovations, European Union lawmakers always respondin particular with the regulation Mica. The latest example concerns a obligation of capital guarantee reserves totally disproportionate for banks that would dare to own Bitcoin or other crypto-assets.
Fractional reserves in euros yes, but for Bitcoin no (and even the reverse)
When we dare not prohibit frontallywould one seek to kill by regulatory suffocation ? This is really what we can ask ourselves when we see the latest thoughts of certain legislators of the European Parliament, concerning the supervision of cryptocurrencies in the banking sector.
This is a press release published on January 24, 2023, by the Economic and Monetary Affairs Committee (ECON), which again worries the European cryptosphere. This same commission, some of whose members had narrowly failed to ban mining Bitcoin (and all Proof of Work/PoW based cryptos).
Never short of ideas for slow adoption decentralized cryptocurrencies, a majority of ECON members this time voted in favor of new restrictions for banks holding (or wishing to hold) digital assets. If the text that the committee has pre-adopted were also to be adopted by the plenary session of the European Parliament, these banks would have to cover their crypto assets with a surreal capital reserve of up to 1,250% counterpart. A sacred weighting of risks!
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1 million euros of cryptos = 12.5 million euros in cover: seriously?
If European banks can afford euro fractional reservesi.e. not having enough euros if customers suddenly demanded them all at once, for bitcoin and cryptocurrencies, this is the exact opposite.
Complies perfectly with “proposals” of the Basel Committee of December 2022, the Members of the European Parliament have therefore added a amendment imposing on banks that any value held in cryptocurrencies should potentially be hedged up to 12.5 times by other assets.
According to the ECON statement, EU lawmakers also want banks to “disclose their exposure to crypto-assets”. So many restrictions that will certainly encourage European bankers to take an interest in Bitcoin and cryptocurrencies (pardon the sarcasm).
The Economic and Monetary Affairs Committee is expected to submit a legislative proposal “by June 2023” So “prudential treatment” reserved for crypto-assets. At this pace of restrictive regulations, there may not be any left more crypto sector to be framed in Europe, so much this jurisdiction will become uncompetitive compared to others less heavily restrictive (even downright crypto-friendly).
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