Strict New Capital Rules for Crypto Assets

The European Banking Authority (EBA) has finalized controversial draft regulations that will force banks to maintain substantial capital reserves against cryptocurrency holdings. Under the proposed framework revealed this Wednesday, institutions must apply a maximum 1,250% risk weight to unbacked digital assets like Bitcoin (BTC) and Ether (ETH) — the highest possible under Basel banking standards.

Three-Tier Crypto Classification System

The EBA's technical standards introduce a granular classification approach:
• Group 2b (unbacked crypto): 1,250% risk weight
• Group 2a (hedged crypto): 1,250% with netting allowances
• Group 1b (asset-backed tokens): 250% risk weight
【This means a €1 million Bitcoin position would require €12.5 million in capital reserves】

Implementation Timeline and Process

The draft now enters a complex approval pipeline:
1. European Commission review (3-month window)
2. Potential amendments or endorsement
3. Parliamentary/Council objection period (3-6 months)
4. Official Journal publication (20-day enactment)
——Industry analysts predict full implementation by Q2 2026——

Global Regulatory Divergence

The EU's conservative stance contrasts sharply with recent moves by other jurisdictions:
• US FDIC allowing crypto activities without pre-approval
• Switzerland's updated DLT Act enabling bank custody services
• JPMorgan exploring crypto-backed loan products
Remarkably, the rules prohibit offsetting different crypto assets, requiring separate capital allocations for BTC and ETH holdings.

Practical Impact on European Banks

Early adopters like Italy's Intesa Sanpaolo face immediate compliance challenges. The bank's reported €1 million Bitcoin investment would now tie up €12.5 million in capital under the draft rules. However, fintech firms like Revolut may avoid direct impact through off-balance-sheet structuring of crypto services.

Broader Market Implications

Market observers warn these regulations could:
• Deter institutional crypto adoption in EU markets
• Create arbitrage opportunities with more lenient jurisdictions
• Accelerate migration of crypto services to non-bank entities
Interestingly, the rules emerge as global tokenization markets are projected to grow 【$10 trillion by 2030】 according to Boston Consulting Group.

Technical Implementation Details

The 87-page draft specifies precise calculation methods for:
• Credit risk exposure modeling
• Market risk assessment protocols
• Counterparty risk aggregation
The framework also mandates daily volatility adjustments and strict liquidity requirements for crypto holdings exceeding 1% of total assets.