EU banks would have to place the maximum possible risk weight on crypto assets under a draft law published by the European Parliament on Friday.

The planned rules could determine how the traditional financial sector engages with digital assets. Under the deal, as previously reported by CoinDesk, banks would have to disclose their direct and indirect exposure to crypto, while the European Commission prepares more fine-grained rules for the sector.

“The potentially increasing involvement of [financial] institutions in crypto-assets related activities should be thoroughly reflected in the Union prudential framework, in order to adequately mitigate the risks of these instruments for the institutions’ financial stability,” said an explanatory text by the parliament’s Economic and Monetary Affairs Committee. “This is even more urgent in light of the recent adverse developments in the crypto-assets markets.”

The proposed risk weight of 1,250% offers little incentive for banks to hold crypto, as – unlike other assets such as mortgages – banks would have to hold capital to match the amount of crypto they have.

(By Jack Schickler)