The European Banking Authority (EBA) today published its final draft Regulatory Technical Standards (RTS) which specify the technical elements necessary for institutions to calculate and aggregate crypto-asset exposures in relation to the prudential treatment of such exposures. The RTS address implementation aspects and will ensure harmonisation of the capital requirements on crypto-asset exposures by institutions across the EU.
These draft RTS further develop the relevant capital treatment for credit risk, counterparty credit risk, market risk, and credit valuation adjustment risk for asset reference tokens (ARTs) that reference one or more traditional asset(s) and ‘other’ crypto-asset exposures - including for example ARTs referencing a crypto-asset – and – unbacked crypto-assets, such as Bitcoin.
These draft RTS also include all the relevant technical elements on the use of netting, aggregating of long and short positions, criteria to allow hedge recognition for other crypto-assets, and the underlying formulas relevant for calculating the exposure value of crypto-assets for the CCR and market risk treatment.
These draft RTS align, to the best possible extent, the capital treatment with the elements specified in the Basel standard on prudential treatment of crypto-asset exposures and take into account the Markets in Crypto Assets Regulation (MiCA).
After the consultation, the requirement for prudent valuation on fair value crypto-asset exposures was removed, and a provision to clarify how long and short positions must be aggregated when determining the exposure limit was added.
The transitional provisions in CRR 3 and these draft RTS provide institutions with a method to capitalise crypto-asset exposures until a permanent prudential framework is implemented, enabling institutions to participate in the fast growing and evolving crypto markets.
Legal basis
Regulation (EU) 2024/1623 amending Regulation (EU) No 575/2013 (CRR 3) introduces in Article 501(d) of the CRR3 a transitional prudential treatment for crypto-assets.
The EBA has developed these draft RTSs in accordance with Article 501d(5) of CRR 3 which mandates the EBA to specify the technical elements necessary for institutions to calculate their own funds requirements in accordance with the approaches set out in paragraph 2, points (b) and (c), including how to calculate the value of the exposures and how to aggregate short and long exposures for the purposes of paragraphs 2 and 3.
According to the mandate, the EBA shall take into consideration the relevant internationally agreed prudential standards as well as existing authorisations in the Union under Regulation (EU) 2023/1114 (MiCAR).
Background
The development of crypto-assets markets and activities has been marked by significant market innovation and advancements. Institutions have shown increasing interest in getting involved in crypto-assets activities. This interest is driven by the potential for new revenue streams and the need to stay competitive in a rapidly evolving financial landscape. Institutions are exploring various roles, including acting as custodians of crypto-assets, issuing crypto-assets, and providing related services such as trading and lending on behalf of their clients. However, this involvement also comes with challenges, including regulatory compliance, risk management, and the need for a robust technological infrastructure.
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