The European Union (EU) struck a political deal with various other bodies in agreeing a new legislation that separates crypto and digital assets from traditional financial instruments.
The ruling will look to apply more stringent rules on banks seeking to hold unbacked cryptocurrencies and other digital assets, as banks were being told by EU officials that they must hold a euro for every cryptocurrency they hold.
The ruling was agreed upon by the European Parliament, the European Commission, and national governments. The first proposals for the legislation were in 2021 and now will be voted upon by members of the EU Council and policy makers.
If the new crypto ruling passes vote and has a timetable for enactment, it will bring forward changes to how banks assess corporate and home loans, but Economic Spokesperson of the European Parliament, Markus Feber, believes the new ruling will bring about stability for Euro banks.
He said in January: “Such prohibitive capital requirements will help prevent instability in the crypto world from spilling over into the financial system.
“Over the past couple of years, we have seen that crypto assets are high-risk investments.”
Meanwhile the Basel Committee on Banking Supervision is working on a global crypto banking rulebook, finalising elements such as the suggestion of a 1,250% risk weight to free-floating cryptocurrencies.
On the recommendation of holding a euro capital gain for every held cryptocurrency, it is believed this measure is being pushed harder by EU policymakers to be set in place soon, which could ultimately provide a better platform for stablecoins to thrive in the EU market due to being tethered to a currency, e.g. the euro.
The EU has also recently looked into outlining new rules inside the Data Act, and blockchain and Web3 developers believe these new measures may impact the significance of smart contracts.
The vague detail and immutable codes of the new rules being discussed has worried the Web3 community, fearing it may prove fatal to smart contracts as they run on blockchain technology and give the owners more control over them.
EU policymakers have wanted to tighten up regulations inside the Data Act but no final draft legislation has been finalised.
Damian Boeselager, a former Parliament negotiator, told CoinDesk: “With the adjustments made to the text we are no longer addressing smart contracts in general but make this regulation applicable specifically to the execution of contractual clauses in the context of data sharing.”