European Banking Authority Unveils New Capital Rules for Crypto – Here’s What Banks Must Do

The European Banking Authority (EBA) has released its draft Regulatory Technical Standards (RTS) on Tuesday detailing how financial institutions must treat crypto-asset exposure under the Capital Requirements Regulation.

These draft rules aim to offer a framework for calculating risks associated with digital assets as the European Union integrates crypto more firmly into its regulatory architecture.

EBA Defines the Capital Treatment for Crypto Assets

The new regulations provide a framework for the treatment of crypto-assets, setting out how banks and institutions must calculate and report their exposure to various types of digital assets.

These include unbacked crypto-assets such as Bitcoin, asset-referenced tokens (ARTs) linked to fiat or commodities, and tokens that reference other crypto-assets.

The rules specify capital treatment for a range of risk categories — including credit risk, market risk, counterparty credit risk, and credit valuation adjustment risk.

Institutions will need to adopt specific formulas and methodologies to calculate their exposure, considering factors such as netting, hedging, and position aggregation.

Alignment with Basel and MiCA Frameworks

The EBA’s draft standards are designed to meet with international standards, particularly the Basel Committee’s guidance on the treatment of crypto-asset exposures.

The RTS also takes into account the European Union’s Markets in Crypto-Assets Regulation (MiCA). One key change from the consultation phase was the removal of the “prudent valuation” requirement for fair-valued crypto exposures — a move welcomed by many in the industry.

Instead, the draft includes a new provision clarifying how long and short positions should be aggregated when calculating exposure limits.

Transitional Rules for Evolving Markets?

Recognising the rapid change in the crypto space, the RTS serves as an interim regulatory measure. Under Article 501d of CRR 3, these standards provide a transitional prudential treatment that allows institutions to capitalise crypto-asset exposures while a more permanent framework is developed.

This transitional approach gives banks the ability to engage with crypto markets — whether through custody, issuance, or brokerage services — while maintaining appropriate safeguards.

What Banks Must Do Now

Institutions with crypto exposure will need to update their risk models, compliance systems, and reporting mechanisms in line with the new RTS.

This includes recalibrating internal capital models to accommodate crypto volatility, implementing accurate valuation methods, and ensuring that any hedging strategies meet the EBA’s strict criteria.

Given the increasing client demand for crypto services — from custody to trading — these rules provide banks with the clarity needed to expand operations while managing risk. Failure to adhere to the new standards could result in higher capital requirements and increased scrutiny from regulators.

Cash Here to Stay, Says ECB Amid Rise in Digital Payments

On Monday, the European Central Bank (ECB) said it is doubling down on its commitment to preserve physical cash.

In a blog post titled “Making euro cash fit for the future,” ECB Executive Board Member Piero Cipollone outlines why cash remains indispensable—and how the ECB plans to ensure it stays that way.

The ECB explains that while digital payments are growing rapidly, especially following the COVID-19 pandemic, Cipollone made it clear: physical cash isn’t being phased out. Instead, it’s being preserved and modernised to coexist with digital innovations, such as the upcoming digital euro.

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