European banks will have to prove if they are “fit to offer bitcoin,” ECB says

The European Central Bank (ECB) revealed that it is preparing a regulatory framework that will allow banks in that territory to offer services related to bitcoin (BTC) and cryptocurrencies.

The European initiative is due to the fact that the crypto-asset markets are developing at an accelerated pace in the eurozone, which it has led banks to consider entering that industry.

In this sense, the ECB ensures that its role as the authority in charge of authorizations and European banking supervision, is “ensuring they do it in a safe and sound way”, explains a statement from the financial institution.

The European authority assured that they are working in “close collaboration” with the supervisors of each country that makes up the European Union, so that this is carried out with “a coherent approach and high standards in all countries”.

This proposal it is part of a more extensive regulation which is not contemplated in the newly approved Regulation on Cryptoassets Markets, better known as the MiCA Law, which was agreed under a “provisional political” agreement last July, as Criptonews reported.

Aspects that banks must comply with to offer bitcoin

The new regulatory framework being drawn up by the ECB is based on how banks should manage the risks posed by offering services with bitcoin. Preliminarily, the regulatory body has established a series of parameters that the bank must comply with.

In principle, the ECB to assess banks’ licence applications who want to carry out activities and services with bitcoin and cryptocurrencies. After this, the regulator will evaluate three aspects such as: the business model, internal governance and suitability.

In the business model, banks will have to demonstrate how their proposal to work with bitcoin coincides with their general activity and the risk profile of the institution. This is to put on record that they will be able to fulfill the commitments they acquire with their clients.

The other aspect has to do with the each bank’s internal policies and whether its procedures are adequate to “identify and assess the risks unique to cryptoassets.”

Finally, there are the suitability assessments. “The higher the complexity or relevance of the cryptocurrency business, the higher the level of knowledge and experience in the field of cryptocurrencies should be” of the bank’s members and managers.

The ECB also reported that it is working on the digital transformation of banks, including the role of technologies with cryptocurrencies, which will result in a horizontal analysis by the end of 2022.