On 16 February 2023, the European Commission (“the Commission”) hosted a meeting of the Expert Group on Banking, Payments and Insurance (EGBPI), where it discussed with Member States’ experts the potential way forward for the implementation in the European Union (EU) law of the December 2022 Basel Committee on Banking Supervision (BCBS) standards on prudential treatment of crypto-asset exposures. By way of background, the BCBS members agreed to implement the standards in their respective jurisdictions by 1 January 2025.

In the EU, the Commission proposed in its October 2023 Banking Package proposal to amend Capital Requirements Regulation (CRR) to include a mandate for itself to review, by 31 December 2025, whether a dedicated prudential framework for exposures to crypto-assets is required, and if so, to submit a suitable legislative proposal to the European Parliament and to the Council. That said, the European Parliament in its negotiating position on the CRR amendments, adopted in February 2023, proposed to accelerate this timeframe. Accordingly, it proposed that the Commission should submit a legislative proposal on the prudential treatment of crypto-assets by 30 June 2023. Until 30 December 2024 banks would be required to apply a 1250% risk weight to their exposures to crypto-assets in the calculation of their own funds requirements. In addition, the European Parliament proposed an amendment requiring banks to disclose their exposures to crypto-assets and related activities.

In the light of the above, the Commission sought Member States’ views on two possible options:

Option (1): Submission of a separate legislative proposal that would implement the BCBS standard in EU law. The Commission notes a number of shortcomings of this option, notably time constraints linked with the upcoming end of the current legislative cycle, and risk of opening up CRR for further amendments.

Option (2): Inclusion of the relevant provisions to the CRR text in the upcoming trilogue negotiations leading to the adoption of the final Banking Package amendments.

The Commission further considered the differences in classification of crypto-assets under the BCBS standard and in the upcoming European Regulation on Markets in Crypto-Assets (MiCA), and prospective way forward to ensure coherence of the European legislation. It also outlined the relevant CRR provisions that are likely to need amendments, should the rules be indeed implemented.

The trilogue negotiations on the Banking Package are expected to begin over the coming weeks.