The EU's insurance regulator has proposed stringent capital requirements for insurers holding cryptocurrencies, necessitating 100% capital backing to protect against risks.
Mitigating Crypto Asset Volatility
The European Insurance and Occupational Pensions Authority (EIOPA) proposal reflects growing concerns about the unpredictability of crypto markets. Ensuring full capital buffers is aimed at reducing systemic risks that could impact the financial stability.
Impact on the Insurance Sector
If implemented, the insurers must allocate equivalent capital for any crypto exposure, potentially discouraging firms from holding digital assets due to the financial burden. However, regulators believe this measure is essential for solvency and policyholder protection.
Reactions and Prospects
Despite being in the consultation phase, the rule indicates the EU's cautious stance on cryptocurrencies. Insurers and stakeholders are encouraged to provide feedback before finalization.
The proposal highlights the EU's efforts to control financial systemic risks from the volatile influence of crypto assets.
