European Union Proposes New Measures for Cryptocurrencies – If Adopted, It Will Be the First Time Such Harsh Measures Will Be Taken

European regulators have proposed tough new capital requirements for insurers holding cryptocurrencies, signaling the EU's toughest stance yet on Bitcoin and other digital assets.

The European Insurance and Occupational Pensions Authority (Eiopa) has recommended to the European Commission that insurers impose a 100% capital requirement on all crypto assets.

The move aims to discourage insurers from investing in digital assets, as the U.S. takes steps to loosen restrictions on crypto assets for traditional financial institutions. Currently, most EU insurers allocate capital equal to 60% to 80% of crypto assets, but the proposed rule would mandate full coverage and significantly increase the cost of holding digital assets.

Eiopa’s proposal goes beyond cryptocurrencies such as Bitcoin and Ethereum, targeting stablecoins pegged to fiat currencies and other tokenized assets backed by traditional investments such as debt or equities. It marks the first time the regulator has imposed such severe capital requirements for any asset class held by insurers.

Despite the tough stance, the impact of the proposed rules is expected to be limited in the short term. According to Eiopa, European insurers held around €655 million worth of crypto assets at the end of 2023, less than 0.01% of their total €9.6 trillion in assets. The majority of these assets were concentrated in Luxembourg, suggesting indirect exposure through investment funds rather than direct ownership.

*This is not investment advice.