EBA Finalizes Harsh Capital Rules for Crypto-Holding Banks
The European Banking Authority (EBA) has officially locked in a regulatory framework that will severely restrict banks’ ability to hold Bitcoin, Ether, and other unbacked crypto assets. The final draft of the regulatory technical standards, released Tuesday, assigns a 1,250% risk weight to these digital assets, forcing banks to hold €12.5 million in capital for every €1 million of Bitcoin on their books.
The rule applies under CRR III, the EU’s Capital Requirements Regulation, which already took effect in July 2024. But the EBA’s latest draft adds the technical details needed for banks to calculate risk exposures across credit, market, and counterparty categories—closing the door on capital efficiency for crypto exposure.
According to the draft, Group 2b assets, which include unbacked cryptos like Bitcoin and Ether, fall under the highest risk weighting possible. Meanwhile, Group 2a assets—which meet some of the Bank for International Settlements (BIS)’ criteria for hedging and netting—also face heavy constraints. Asset-referenced tokens, or Group 1b assets, face a lower 250% risk weight.
Capital Demands Could Deter Bank Adoption
The final framework is now headed to the European Commission, which will have up to three months to approve, amend, or return the rules. If accepted, the law will become a delegated regulation and be forwarded to the European Parliament and Council, which have up to six months to object.
Should the proposal pass without objection, it will enter into force 20 days after publication in the EU’s Official Journal.
The rules could directly impact major European institutions. For instance, Intesa Sanpaolo, Italy’s largest bank, which recently bought €1 million worth of Bitcoin, would now need to hold €12.5 million in capital to remain compliant. Smaller and more crypto-friendly fintechs like Revolut are unlikely to be hit, since their crypto services operate off balance sheet, under separate subsidiaries.
Importantly, the regulation also bans offsetting crypto exposures, meaning a bank can’t hedge Bitcoin with Ether to lower its risk—each position must be backed independently.
Europe Bucks Global Crypto Trends
The EBA’s framework starkly contrasts with recent developments in the U.S. and Switzerland, where regulators are taking a more open and integrated approach.
In March, the U.S. FDIC greenlit crypto activities by banks without requiring prior approval. In April, Switzerland updated its DLT Act, giving banks the ability to custody tokenized securities and support stablecoin issuers within a regulated legal framework.
Even politically, the White House under Trump is taking an aggressive stance to protect access to banking for crypto firms, with a pending executive order demanding regulators address “debanking” concerns.
With U.S. banks like JPMorgan exploring crypto-backed loans, Europe now risks falling behind in the evolving digital financial landscape. Critics warn that over-regulation could stifle innovation, especially as tokenization and DeFi adoption accelerates globally.
High Stakes for EU Financial Innovation
By enforcing draconian capital requirements, the EU is signaling a preference for containment over innovation. While this may protect against short-term volatility or systemic risk, it may also discourage legitimate bank engagement in the fast-growing crypto ecosystem.
Some policymakers argue that such caution is prudent. Others warn it inhibits Europe’s competitiveness just as the U.S. and Asia appear poised to capture crypto-finance momentum.
As banks adjust to the new rules, the gap between traditional and digital finance in the EU may widen—unless the regulation evolves to reflect market maturity and technological advancements.
