European Insurance coverage and Occupational Pensions Authority (EIOPA) proposes 100% capital reserves for insurers’ crypto holdings.
As of late 2023, European insurers weren’t closely invested in cryptocurrencies. They held a tiny 0.0068% of the trade’s total property.
The proposal might discourage future crypto investments by insurers.
The European Union’s insurance coverage regulator, European Insurance coverage and Occupational Pensions Authority (EIOPA), has proposed a brand new rule that may require crypto insurers to carry capital reserves equal to the complete worth of their cryptocurrency investments.
Unveiled by the EIOPA in a technical report submitted to the European Fee on March 27, 2025, this proposal seeks to defend policyholders from the wild swings and uncertainties tied to digital property.
With cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) recognized for his or her rollercoaster value actions, EIOPA is taking no possibilities, advocating for a 100% capital cost that far exceeds the necessities for conventional investments like shares or actual property.
Why the 100% capital requirement for crypto insurers?
Cryptocurrencies have surged in reputation over the previous decade, drawing in everybody from informal buyers to main establishments. Nevertheless, their attraction comes with a catch: excessive volatility.
As an illustration, BTC has weathered value drops as steep as 82% in a single 12 months, whereas ETH has seen declines of as much as 91%.
Such dramatic shifts have prompted regulators to behave, and EIOPA’s newest proposal is a direct response to those dangers.
By requiring insurers to put aside capital matching your complete worth of their crypto holdings, the watchdog goals to make sure that corporations can take in a complete loss if the market crashes, defending the hundreds of thousands of policyholders who depend on their stability.
Notably, this 100% capital requirement stands out when in comparison with the principles for extra acquainted asset lessons. Shares, as an example, sometimes carry a capital cost of 39–49%, that means insurers should maintain lower than half their worth in reserve. Actual property is even lighter, requiring simply 25%.
Cryptocurrencies, nonetheless, are in a league of their very own, in keeping with EIOPA, which factors to historic information displaying extreme value drops even in well-known property like BTC and ETH.
In contrast to shares or property, crypto property don’t profit from diversification, leaving insurers absolutely uncovered to their unpredictable nature—a threat the regulator isn’t prepared to miss.
EIOPA’s cautious deliberation
The choice to impose a 100% capital cost didn’t come evenly. EIOPA weighed a number of choices, together with sticking with the present patchy guidelines or adopting an 80% stress stage akin to what’s used for intangible property.
One other thought was a “look-through” method for tokenized property, the place the capital cost would mirror the underlying asset’s threat.
However with the crypto market nonetheless younger and information scarce, compounded by the early levels of the EU’s Markets in Crypto-Property Regulation (MiCA), EIOPA opted for essentially the most cautious path. The 100% requirement, it argues, is the most secure guess till extra readability emerges, although it’s open to revisiting this stance because the market matures.
Notably, EIOPA’s proposal doesn’t exist in isolation—it echoes the method taken within the banking sector. Underneath the Capital Necessities Regulation (CRR), banks face an identical 100% stress check for sure crypto property throughout a transitional interval.
The transfer brings insurers in step with this, making a unified entrance throughout EU monetary sectors. It additionally plugs a niche left by MiCA, which presents a broad framework for crypto-assets however lacks particular steering for insurers.
By aligning these laws, the EU is signaling a coordinated effort to tame the dangers of digital currencies whereas fostering a secure monetary setting.
Blended reactions from the trade
Not everyone seems to be on board with EIOPA’s powerful stance. Throughout consultations, some stakeholders argued {that a} blanket 100% requirement is just too harsh, ignoring the variations between risky cryptocurrencies and extra secure tokenized property.
Critics say this one-size-fits-all method may stifle innovation or deter insurers from exploring digital markets.
On the flip facet, supporters applaud the warning, pointing to the crypto market’s historical past of sudden crashes and scandals.
EIOPA has heard either side however insists that, for now, prudence trumps flexibility—although it’s left the door open for future tweaks as extra information rolls in.
If the European Fee greenlights this proposal, it may reshape how insurers method cryptocurrencies.
The excessive capital value may discourage vital holdings, not less than till the market stabilizes or the principles soften.
Past insurers, the choice may ripple outward, influencing how different regulators worldwide deal with digital property in finance.
