January 27, 2023
In an effort to restrict the amount of unregulated cryptocurrencies that banks can store, legislators in the European Union have established tough regulations on banks holding digital assets.
Strict regulations for banks that handle cryptocurrencies
For any financial institution holding cryptocurrencies, the Economic and Monetary Affairs Committee of the European Union (E.U.) Parliament has implemented additional capital requirements.
A member of the European Parliament named Markus Ferber claims that banks are now compelled to back their cryptocurrency holdings on a 1:1 basis with fiat money, specifically euros.
The capital requirements for banks will assist maintain stability within the traditional financial system by preventing cryptocurrency’s volatility from having an impact on it, according to Ferber, who also asserts that the new rule is necessary given the risky nature of cryptocurrency investment.
The new legislation may potentially apply to tokenized securities, according to the Association for Financial Markets in Europe (AFME).
E.U. politicians have taken a tough stance when international banks that service consumers in the E.U. are obliged to create local offices or convert existing ones into more heavily financed subsidiaries, in addition to the limits placed on institutions dealing with digital assets.
Regulators keep stepping up their scrutiny
The E.U. is following a global trend toward tighter regulation of cryptocurrencies in an effort to shield the financial system from the volatility and unpredictability of the crypto market.
According to a number of experts, stepping up regulatory monitoring is a crucial step in the right path. Kelvin O’Leary, a well-known proponent of cryptocurrencies, commended the most recent developments in regards to regulators’ response to the infamous FTX scam in a video interview with Kitco News.
O’Leary claims that the sector is changing and that regulation has reached its pinnacle. He thinks that the heightened scrutiny from legislators and regulators will compel participants in the cryptocurrency business to act properly in order to maintain compliance.
Source: BINANCE FEED
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