Catenaa, Tuesday, April 01, 2025- The European Union (EU) has proposed a rule requiring insurers to hold capital reserves equal to their crypto holdings, a move aimed at addressing the volatility and risks associated with digital assets.
The proposal, made by the European Insurance and Occupational Pensions Authority (EIOPA), stresses the need for enhanced financial safeguards to protect policyholders.
Unlike other asset classes, such as stocks or real estate, which are not subject to full backing, crypto assets would require insurers to maintain capital reserves that mirror their value. The new measure seeks to fill regulatory gaps between existing insurance frameworks and the Markets in Crypto-Assets Regulation (MiCA).
EIOPA has presented four options to the European Commission, including leaving current regulations unchanged or imposing various levels of stress tests. The agency recommends a 100% reserve requirement, aligning with the transitional treatment of crypto-assets under the Capital Requirements Regulation (CRR).
While this approach addresses the high-risk nature of crypto assets, EIOPA acknowledges that a more flexible framework may be needed in the future as crypto adoption grows. The proposal aims to avoid unnecessary complexity while ensuring the stability of the insurance sector amidst evolving market conditions.
The European Commission is currently considering the proposal, which could significantly impact the way insurers manage crypto-related risks going forward.
