European Union lawmakers have voted on a new draft law that would impose stricter rules on banks in the bloc that are holding cryptocurrencies. EU lawmakers have voted in favour of new rules that would require banks to hold capital reserves equivalent to the full value of their cryptocurrency assets.

This means that if a bank holds USD 10 million worth of cryptocurrency, for instance, it will have to hold USD 10 million in reserves as well. These new rules should come into effect in January 2025. These regulations are being put in place to protect against potential losses from cryptocurrency investments, as the value of these assets can be highly volatile.

However, according to the Association for Financial Markets in Europe (AFME), an industry body, the draft law doesn’t offer a clear definition of crypto assets and could end up being applied to tokenised securities as well. Moreover, AFME officials cited by Reuters expressed their concern regarding a potentially significant adverse impact of tightening EU access to international markets and cross-border services. The new regulations are in line with recommendations from global banking regulators, such as the Basel Committee on Banking Supervision, which has called for stricter oversight of the use of cryptocurrency by financial institutions.

According to Reuters, EU states have already approved their version of the draft law, and lawmakers now need to negotiate a final text with member states, which could result in further modifications. To be specific, in order to pass into law, the proposed measures require approval from the European Parliament and need to be negotiated with national finance ministers who meet in the Council of the European Union as part of a more comprehensive package of bank capital reforms. The European Union is keeping a close watch on privacy coins In November 2022, the European Union considered issuing a ban that would prevent banks from dealing with privacy coins.

Cryptocurrencies that aim to enhance user privacy and support anonymous means of payments could be forbidden as a result of new European AML rules according to a draft of a money laundering bill from Czech officials that ended up at CoinDesk. The document stated that credit institutions, financial institutions, and crypto-asset service providers would all be affected by the new rules. According to EU officials, the new measures would attempt to minimise the risks that come with crypto assets specifically designed to avoid traceability.

Examples of such privacy coins include zcash, monero, and dash. In order to pass into law, the bill must be agreed upon by both the Council and the European Parliament. .