EU tightens grip on crypto friendly banks. Ordered to hold Euro equivalent to the crypto held

European lawmakers impose strict regulations on crypto friendly banks. Want them to hold more Euros against the deposited cryptocurrency.

In a recent announcement made by European Parliament, the banks have to hold Euros of their own capital for every Euro they hold in cryptocurrency. It’s like a 1:1 ratio of Euros and the equivalent worth of cryptocurrency deposited in the bank accounts.

The regulators stressed upon crypto assets by calling them “high-risk investments”. They validated the need for pushing such measures by focusing on saving crypto investors from the volatile and unpredictable crypto market.

Markus Ferber, a member of the European Parliament added his remarks on the decision by saying “Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.”

This move will also put a cap on the number of crypto assets held by the bank which means unbacked assets like Bitcoin or Ethereum will have a ceiling pertaining to the maximum amount of tokens held by the banks.

As per the reports published by Reuters, the final draft of such regulations will come into effect in 2025.

The news came at a time when countries have started focusing on regulating cryptocurrencies. Countries like Italy and Portugal have already proposed crypto based capital gains tax. Italy has imposed 26% crypto tax on capital gains above 2000 Euros while Portugal’s proposal stands at 28%.

Meanwhile, South Africa’s Advertising Regulatory Board has set standard guidelines for marketing cryptocurrencies and digital assets, mandating advertisers to provide disclaimers like any other financial product.

The stage is set for crypto regulations this year which can lead to crypto adoption.

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