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EU Watchdog Seeks Full Coverage for Insurers’ Crypto
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The European Insurance and Occupational Pensions Authority (EIOPA) has suggested that insurance companies should fully back their crypto holdings with an equal amount of capital. This proposal, announced on March 27, aims to reduce risks for policyholders as the crypto market remains highly volatile.
EIOPA argues that cryptocurrencies are far riskier than traditional assets like stocks or real estate. As a result, the regulator believes a 100% capital requirement is necessary to protect insurers from potential losses. This means that for every euro an insurer holds in crypto, it must have another euro in reserve.
EIOPA proposes full deduction of cryptos from (re)insurers’s capital, even stablecoins. The rule on stablecoins is currently lookthrough the underlying asset.
EU (re)insurers have 650m of crypto
— JohannesBorgen (@jeuasommenulle) March 28, 2025
The Options on the Table
EIOPA has outlined four possible paths for the European Commission to consider. One of the options involves keeping things as they are. Another proposal involves an 80% capital requirement. This means insurers have to hold reserves covering 80% of their crypto exposure. A third option is a 100% capital requirement. This is the strictest approach, treating crypto as highly volatile and requiring full coverage. The final option proposes a broader review, which will assess the risks of all tokenized assets, not just crypto.
Circle submitted a short response to EIOPA’s consultation on capital requirements for investments in crypto-assets in the EU
EIOPA’s current draft advice proposes a uniform 100% stress factor on all crypto-assets, a method that overlooks the varying risk profiles of different… pic.twitter.com/6mz54R0YcZ
— Patrick Hansen (@paddi_hansen) January 20, 2025
EIOPA strongly favors the third option, saying that an 80% requirement is not strict enough given crypto’s price swings. The organization pointed out that Bitcoin and Ether have seen price drops of 82% and 91% in the past.
Who Will Be Affected Most?
Crypto exposure in Europe’s insurance industry remains small. However, Luxembourg and Sweden are the most exposed, holding 69% and 21% of all crypto-related insurance investments. Other affected nations include Ireland (3.4%), Denmark (1.4%), and Liechtenstein (1.2%).
Disclaimer
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We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.
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March 30, 2025 at 05:58PM
March 30, 2025 at 06:00PM
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