EU Regulator Advocates Complete Crypto Asset Capital Reservation
Crypto Investments Face Strict Regulation from EIOPA
💥 Here's the lowdown: The European Insurance and Occupational Pensions Authority (EIOPA) is demanding tougher guidelines on the way insurers deal with crypto investments. The regulator urges the European Commission to enforce a 100% capital requirement for digital assets held by insurance firms.
Under EIOPA's plan, insurers must hold capital equivalent to the full extent of their crypto holdings, no matter how they categorize these assets on their balance sheets. This rule would apply to both direct and indirect exposure to digital currencies.
In their technical advice report, EIOPA emphasized the risks linked to crypto investments. They pointed out possible issues such as extreme price volatility, market manipulation, low liquidity, and poor price transparency. EIOPA believes that a 100% capital requirement is a sensible way to manage these risks.
"EIOPA advocates for a one-to-one capital requirement to be imposed consistently on all crypto holdings of EU insurers," the regulator declared.
As of now, European insurers have minimal investment in crypto. According to the report, insurers in the EU had invested €655 million ($708.68 million) in digital assets by the end of 2023. That amount accounts for only 0.0068% of the sector's total assets, which amount to €9.6 trillion ($10.39 trillion).
"Overall, the investments of insurers in crypto-assets remain minimal," the regulator remarked.
According to the Financial Times, under the current system, EU insurers allocate capital equivalent to 60% to 80% of their crypto holdings. If the European Commission adopts EIOPA's proposal, insurers will need to substantially beef up those reserves to cover the full value of their digital assets.
(Enrichment Data: The European Insurance and Occupational Pensions Authority (EIOPA) has recommended a significant change to the capital requirements for crypto holdings by EU insurers. As of 27 March 2025, EIOPA advises that all cryptoasset holdings by EU insurers and reinsurers should be subject to a 100% capital requirement. This means insurers must hold capital equivalent to the full amount of their cryptoasset exposures, reflecting the high risks associated with these assets. EIOPA argues that current capital treatments heavily underestimate the risks posed by cryptoassets, and the proposed one-to-one capital charge provides a straightforward, harmonized interim solution. While EIOPA acknowledges that a more nuanced and differentiated approach may be necessary as market adoption evolves, the blanket 100% charge is considered appropriate for now.)
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- The European Insurance and Occupational Pensions Authority (EIOPA) proposes that all business deals involving digital assets by EU insurers should be accompanied by an equivalent amount of capital, given the high risks associated with these technology-driven investments.
- As the regulation of digital investments continues to tighten under bodies like EIOPA, the business sector, including finance, must reevaluate their strategies and potentially invest more capital to meet the new requirements when dealing with technology-driven assets like cryptocurrencies.
