European regulators are proposing strict new capital requirements for insurers that hold cryptocurrencies, signaling the EU’s toughest stance to Bitcoin and other digital assets.
The European Insurance and Labor Pensions Administration (EIOPA) recommends the Commission that insurers impose 100% capital requirements on all crypto assets.
The move aims to prevent insurers from investing in digital assets as the US is taking steps to ease restrictions on traditional financial institutions’ crypto assets. Currently, most EU insurers allocate capital to 60% to 80% of crypto assets, but the proposed rules require full coverage and significantly increase the cost of holding digital assets.
EIOPA’s proposals go beyond cryptocurrencies such as Bitcoin and Ethereum, targeting stable, silly things pinned in Fiat currencies and other tokenized assets, backed by traditional investments such as debt and equities. This is the first time a regulator has imposed such strict capital requirements on an asset class held by an insurance company.
Despite the strict stance, the impact of the proposed rules is expected to be limited in the short term. According to EIOPA, European insurance companies had around 655 million euros of crypto assets at the end of 2023, with assets of less than 0.01% of 9.6 trillion euros. The majority of these assets are concentrated in Luxembourg, suggesting indirect exposure by investment funds rather than direct ownership.
*This is not investment advice.
