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Watchdog Watchdog wants crypto holders of 100% covered insurers, citing volatility

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The European Union insurance authority has suggested a blanket rule that will order insurance companies to maintain capital equal to their crypto -holding costs as part of a proposal to reduce risks for those with -the policy.

The new one proposal -The European Insurance and Occupational Pensions Authority made a technical advice report to the European Commission on March 27-would set a more strict standard than other property classes, such as stocks and real estate, which do not need to be half-back.

“Eiopa considers a 100% haircut in the usual formula that is neat and appropriate for these possessions in view of their natural risks and high volatility,” this Says in a separate statement.

Such a proposal will supplement a regulation gap between regulation of capital requirements and Crypto-Assets regulation markets .

Cryptocurrencies, Sweden, Insurance, European Union, Luxembourg — *Circle argued in January that a blanket of 100% stress factor in crypto assets was not account for lower risk stablecoins. Source:* *Circle*

Eiopa described four options for the European Commission to consider – one: do not make changes; Two: order an 80% “stress level” in crypto assets; and three: order a 100% level of stress in the crypto asset.

Stress -level percentages determine how much capital companies need to remain solvent.

The fourth option called on European Commission To consider the dangers of tokenized genitals more widely.

Eiopa said the choice of three is the most appropriate choice.

“An 80% stress on the amount of crypto asset exposes does not appear to be neat,” whereas “a 100% stress is more appropriate and aligned with one of the techniques of transferring treatment of crypto-assets under the CRR,” Eiopa said.

100% stress refers to the assumption that crypto asset prices can fall 100% and the variety -the spread of risk to various possessions -will not reduce this stress. Eiopa pointed to that bitcoin (Btc) and ether (Eth) fell 82% and 91%, respectively, in the past.

A 100% capital charge for crypto assets is reflects a tighter approach Compared to stocks, which range between 39% and 49%, and real estate, with a 25% capital charge, According to In solvency capital requirements laid out at the commission granted regulation 2015/35.

Eiopa said a 100% capital charge for crypto-related (RE) insurance activities should not be “extremely heavy” and no material costs for policy owners.

“Capital requirements will fully gain the risk of crypto-assets with a positive impact on policy protection in case of future exposure material.”

Eiopa acknowledged that part of the crypto-asset (RE) insurance were accounts for 655 million euros or 0.0068% of all European activities-even though it was referred to as “immaterial.”

“At the same time crypto property is a high risk investment that can result in total loss of value,” Eiopa said, explaining why it recommends the choice of three.

Luxembourg and Sweden can be hit by the proposed rule

Insurers in Luxembourg and Sweden are probably the most affected, according to a Q4 2023 report mentioned by EIOPA, who found that these two countries cost 69% and 21% of all asset-related exposures related to (re-) re-insurance activities.

Ireland, Denmark and Liechtenstein also cost 3.4%, 1.4% and 1.2% of the tasks.

Most of these activities are outlined within funds, such as Funds exchanged by the exchange, and will be held on behalf of linked unit-related policies, Eiopa said.