European Insurers Face 100% Capital Requirement on Crypto Holdings

Story Highlights

• EU proposes 100% capital requirement for crypto-holding insurers.

• US relaxes crypto rules while EU tightens regulations further.

• European insurers must hold full reserves for crypto assets.

The European Union is planning stricter rules for insurance companies holding cryptocurrencies. EU regulators suggested that insurance companies must dedicate their entire capital reserves to digital assets, including Bitcoin, when making investments. Regulators propose the highest-ever financial constraints on crypto assets that insurance providers purchase. The majority of European insurance firms reserve between 60% and 80% of their capital to protect their cryptocurrency assets. The European Commission needs to approve the standing proposal currently under review.

EU Proposes 100% Capital Requirement for Crypto-Holding Insurers

EIOPA functions as the leading organization that advocates for increased regulatory oversight. Insurance firms need to be deterred from buying digital assets according to the goals of these regulations. The United States shows trends opposite to the current developments because authorities relax restrictions on crypto assets for financial institutions.

The proposed capital threshold would bond both Bitcoin alongside all other crypto assets and stablecoins linked to fiat currencies as well as security-based digital assets. The capital requirement would extend to every tokenized asset that has its value derived from either debt instruments or equity investments. The proposed rule requires insurers to maintain capital equal to 100% of their digital assets, which results in higher investment costs for crypto investments.

The suggested limitations in the proposal might be ineffective in the present moment. The present value of crypto assets among European insurers amounts to only a limited portion of their total institutional portfolio. During the last quarter of 2023, the total crypto-asset holdings of European Union insurers amounted to approximately €655 million. The European insurance sector assets total €9.6 trillion, yet crypto holdings make up less than 0.01% of this total.

Luxembourg holds the majority of these crypto assets, but the insurers maintain their positions through indirect investment funds. EIOPA classifies cryptocurrencies as high-risk investments because of their market volatility, together with manipulation problems and unclear operational transparency, and limited trading market stability. Bitcoin suffered an 82% price reduction in a single year, and Ethereum experienced a 91% value decrease during 2017.

EU Tightens Crypto Regulations While US Moves Toward Looser Policies

Unlike the EU, global banking regulators now show greater flexibility regarding crypto regulation for financial institutions. The Basel Committee on Banking Supervision has introduced two distinct categories for crypto assets. Stablecoins and tokenized assets form the first category that banks can treat analogously to the underlying value of their securities. For the second category of unstable cryptocurrencies, banks need to maintain a full capital reserve.

The crypto-friendly dynamic of the United States continues its progression while other nations develop their policies in this domain. When Donald Trump secured victory in the November 2024 election, the US government declared its intent to make America the global leader in Bitcoin operations. The US Securities and Exchange Commission (SEC) took away its previous mandate for crypto-holding companies to include digital assets as liabilities in January 2025. Financial institutions now have better ways to control their digital assets because of this regulatory change.

The EU has established precautionary guidelines to regulate the expanding crypto market. European regulatory bodies work to decrease potential hazards in the market, but the United States supports cryptocurrencies in its economic policies. The authorized proposal would implement stricter regulatory barriers against crypto investments by European insurers, which would increase their holding costs. As global regulations evolve, the future of cryptocurrency in the financial sector remains uncertain.