EU Proposes 100% Capital Requirement for Insurers Holding Crypto

The European Insurance and Occupational Pensions Authority (EIOPA) has proposed a 100% capital requirement for cryptocurrency assets held by European Union insurers. This move is aimed at discouraging insurance companies from holding crypto due to its high volatility, liquidity risks, and regulatory uncertainty.

What Does This Mean for Insurers?

If implemented, the proposal would require insurers to hold an equivalent amount of capital against any cryptocurrency assets they own. For example, if an insurer holds €10 million in Bitcoin or other digital assets, they would need to set aside €10 million in capital reserves to cover potential losses.

This strict requirement effectively makes it costly and impractical for insurers to invest in or hold cryptocurrencies, aligning with the EU’s cautious regulatory stance toward digital assets.

Why Is the EU Taking This Approach?

EIOPA has cited several risks associated with crypto holdings, including:

• Extreme Price Volatility 📉 – Cryptocurrencies can experience rapid price swings, making them unpredictable for long-term investment.
• Liquidity Risks 💰 – In times of market stress, selling large amounts of crypto without impacting prices can be difficult.
• Regulatory Uncertainty ⚖️ – Crypto regulations are still evolving, increasing legal and compliance risks for financial institutions.

By imposing a 100% capital buffer, the EU aims to limit insurers' exposure to these risks and ensure financial stability in the insurance sector.

Impact on the Crypto & Insurance Industry

This proposal could significantly reduce the involvement of insurance companies in crypto investments. It may also slow down innovation in crypto-related insurance products, such as policies covering digital asset theft or fraud.

At the same time, the move highlights the EU’s strict stance on financial risk management, ensuring that insurers remain resilient even in the face of crypto market fluctuations.

What’s Next?

The proposal is still under review and may face feedback from industry stakeholders before becoming law. If passed, EU insurers will likely have to reduce or eliminate their cryptocurrency holdings, reinforcing traditional asset classes over digital ones.

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