The European Union’s insurance regulator has proposed a sweeping measure requiring insurers to hold capital equivalent to the full value of their cryptocurrency assets.
This initiative, aimed at protecting policyholders, was outlined in a Technical Advice report submitted by the European Insurance and Occupational Pensions Authority (EIOPA) to the European Commission.
Unlike traditional assets such as stocks and real estate, which are not subject to such stringent capital requirements, EIOPA’s proposal sets a far stricter standard for crypto holdings. In a separate statement, the regulator emphasized that a “100% haircut in the standard formula” is a necessary safeguard due to digital assets’ inherent risks and extreme volatility.
According to EIOPA, this proposal would bridge a regulatory gap between the Capital Requirements Regulation (CRR) and the Markets in Crypto-Assets Regulation (MiCA). The regulator pointed out that the EU’s current insurance framework lacks specific provisions for crypto assets, making this initiative a critical step in addressing regulatory uncertainties in the sector.
To guide the European Commission’s decision, EIOPA presented four possible regulatory approaches. The first option is to leave the existing framework unchanged. The second introduces an 80% “stress level” for crypto assets, while the third imposes a stricter 100% stress level. These stress levels determine the amount of capital insurers must hold to maintain solvency amid market fluctuations.
The fourth option takes a broader perspective, urging the European Commission to consider the risks associated with tokenized assets as a whole. However, EIOPA ultimately recommended the third option, advocating for a 100% stress level as the most prudent choice.
Despite its firm stance, EIOPA acknowledged that if crypto adoption expands further, a more “differentiated approach” may be necessary in the future. Meanwhile, outside the EU, regulators are also taking a critical look at crypto investments. The UK’s Financial Conduct Authority (FCA) has raised concerns over the increasing number of young investors under 35 turning to cryptocurrencies as their first financial investment. FCA Chief Executive Nikhil Rathi warned that these assets carry significant risks with the potential for total financial loss.
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