EU Raises Crypto Capital Standards, SEC Prevents Public Listings

Authorities in both the EU and the U.S. have restricted the activities of companies due to their links with cryptocurrency.

The European Parliament’s economic affairs committee approved the final implementation of the Basel III accords earlier today, as expected. The global capital rules will require banks holding crypto assets to carry a “prohibitive” amount of collateral to back them. Committee member Markus Ferber said banks must “hold a euro of their own capital for every euro they hold in crypto.” 

European Union Will Enforce New Rules from 2025

However, the Association for Financial Markets in Europe expressed concern that the legislation included no working definition of crypto assets. Consequently, the industry body warned that it could potentially apply to tokenized securities. While the draft includes several temporary divergences, giving banks more time to adjust, the changes will take effect from Jan. 2025.

European Union member states have already approved their version of the legislation that could inhibit banks from providing further crypto services. In the United States, the federal securities regulator has been passively preventing several crypto-affiliated firms from achieving a public listing.

Last year, several companies including Circle Internet Financial and eToro Group Ltd. had sought stock-exchange listings through mergers with special-purpose acquisition companies. However, these companies failed to secure the necessary approval from the Securities and Exchange Commission (SEC), and so remain in limbo.

Although the SEC had previously approved Coinbase, market upheavals since then have made it much more conscientious about crypto listings.

Excessive Questioning 

While many crypto companies would dispute the SEC’s claim that most cryptocurrencies are securities, they still depend on its approval for public listings. If they want their shares to be available to the public, companies must have their disclosures deemed “effective” by regulators.

But while the SEC required that Coinbase answer three letters of questions in order to receive its approval, it has now been reviewing these public filings for nearly a year or more. Circle had spent much of last year working to address the more than 100 questions the SEC had raised.

Although Circle felt confident it was approaching a verdict, FTX filed for bankruptcy on Nov. 11., complicating things further. Eventually, it was forced to call off the deal in Dec.