European Regulators Push for Stricter Capital Requirements on Insurers Holding Cryptocurrencies

European regulators are pushing for stricter capital requirements on insurers holding cryptocurrencies, marking a significant shift in the EU's approach to digital assets.

European regulators are moving to impose stricter capital requirements on insurers who hold cryptocurrencies, according to reports on Wednesday, August 23.

The European Insurance and Occupational Pensions Authority (Eiopa) has recommended that the European Commission impose a 100% capital requirement on any crypto-related holdings by insurers.

The recommendation, if adopted, would drastically increase the cost of holding digital assets, potentially discouraging insurers from engaging with the sector.

Currently, most EU insurers allocate capital equal to 60–80% of their crypto assets. However, the proposed regulation would mandate full coverage.

Eiopa’s advice encompasses not only Bitcoin and Ether but also stablecoins pegged to fiat currencies and tokenized assets linked to traditional investments like stocks and bonds.

This measure represents an extreme level of capital restriction for any asset class that insurers deal with.

While the immediate impact on the industry may be minimal—by the end of 2023, European insurers held an estimated €655 million (around $708 million) in crypto assets, less than 0.01% of the region’s total €9.6 trillion in assets, and a significant portion of this exposure was in Luxembourg, likely through investment funds rather than direct holdings—the potential implications are noteworthy.