- The European Union has placed a strict measure over its banks.
- It says banks must hold a Euro in capital for every Euro it holds in crypto.
- This is to ensure some semblance of stability between the traditional and crypto markets.
The European Union makes a surprising announcement that leaves most of the Twitter crypto space in giggles. The entity made an announcement where it requires banks to hold a Euro of its own capital for every Euro they hold in crypto.
While this is indeed a noble call taken by the European Union, many are fascinated by how the EU had to actually make an official announcement for it. After all, shouldn’t it be the norm for banks to hold capital to back up the crypto it holds?
This is very much a good move as now banks cannot simply ‘print’ more crypto like they used to print more fiat cash in times of distress. Initially, this fiasco was the cause of the economic collapse of 2008. It was, ultimately, the push humanity needed to adopt decentralized currencies and DeFi initiatives.
The official decision was made by the European Parliament’s Economic and Monetary Affairs Committee. In detail, it voted to impose strict restrictions over banks that sought to hold crypto.
This measure is a clear bid to tackle international norms that can limit the amount of unbacked assets like BTC and ETH lenders can hold. That is, assets they can hold before the European Commission proposes further extensive measures.
The economic spokesperson for the parliament’s largest political grouping, Markus Ferber says:
“Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.”
He expresses how the past years have shown how much of a high-risk investments crypto assets can be. Thus, he deems this a very imperative measure to be put into place. Certainly, additional rules and regulations could be a huge help for the crypto sector to hold unsavory service providers accountable. Perhaps this can ensure that similar stories of FTX and Terra will never occur again.
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