EU Regulator Proposes Capital Requirements for Crypto Holdings in Insurance Industry

The European Insurance and Occupational Pensions Authority (EIOPA) has proposed a strict regulation requiring insurance companies to hold capital equal to their crypto holdings.

This measure aims to protect policyholders and sets a higher standard than other asset classes like stocks and real estate, which don’t need full backing.

In its March 27 Technical Advice report to the European Commission, EIOPA recommends a 100% haircut in the standard formula for crypto assets, citing their inherent risks and volatility.

The proposal seeks to address a regulatory gap between the Capital Requirements Regulation and the Markets in Crypto-Assets Regulation (MiCA), as the current EU framework for insurers lacks specific crypto provisions.

EIOPA presented four options to the European Commission: no changes, an 80% stress level, a 100% stress level, or a broader consideration of tokenized assets. EIOPA supports the 100% stress level, arguing that 80% is not sufficiently prudent.