EU Proposes 100% Capital Requirement for Insurers’ Crypto Holdings Amidst Volatility Concerns
EU’s Insurance Authority Proposes 100% Capital Requirement for Crypto Assets
The European Insurance and Occupational Pensions Authority (EIOPA) has put forward a proposal that would require insurance firms to hold capital equal to the full value of their cryptocurrency holdings, citing the "inherent risks and high volatility" of crypto assets. This recommendation, issued in a Technical Advice report on March 27, 2025, aims to mitigate risks for policyholders, ensuring that insurers can remain solvent despite the highly volatile nature of cryptocurrencies.
The new policy, if adopted by the European Commission, would impose a far stricter capital requirement than is currently applied to other asset classes such as stocks and real estate, which are not required to be backed by capital at anywhere near 100%. Stocks and real estate, for instance, are subject to capital requirements of around 39% to 49% and 25%, respectively, under existing regulations.
EIOPA’s Proposal Aims to Address Regulatory Gaps
The proposal would create a new regulatory framework for crypto-asset holdings by insurance firms, filling a gap in current European insurance regulations. EIOPA noted that there are no specific provisions in the EU's existing regulatory framework for crypto assets, despite the growing interest and investment in digital currencies. As a result, it has recommended a new approach to ensure that insurance firms are adequately prepared to deal with the risks associated with holding cryptocurrencies.
EIOPA laid out four options for the European Commission to consider:
No change to current capital requirements.
A mandate requiring insurance firms to maintain 80% of capital as a “stress level” for crypto assets.
A 100% capital requirement for crypto assets.
A broader consideration of the risks posed by tokenized assets.
EIOPA strongly favors the third option, advocating for a 100% capital charge on crypto assets. This recommendation is based on the idea that cryptocurrency prices could potentially fall to zero, making the traditional method of diversification ineffective in mitigating risk.
A Stricter Approach to Crypto Investments
The reasoning behind the proposed 100% capital requirement stems from the high volatility of cryptocurrencies. EIOPA pointed out that cryptocurrencies like Bitcoin (BTC) and Ether (ETH) have experienced significant price declines in the past, with Bitcoin falling by as much as 82% and Ether by 91%. As a result, EIOPA believes that a 100% capital requirement for crypto assets is necessary to safeguard insurers’ solvency and ensure policyholder protection.
According to the authority, such a measure would not be “overly burdensome” for insurers and would not result in additional costs for policyholders. The proposal aims to fully capture the risks associated with crypto-asset investments, ensuring that insurance firms are prepared for potential losses in the event of significant market downturns.
Learn more about the risks associated with cryptocurrency volatility here.
Impact of the Proposed Rule on Insurers in Luxembourg and Sweden
If the proposal is enacted, countries like Luxembourg and Sweden could be most affected, as they currently have the highest levels of exposure to crypto assets within the insurance sector. A report from Q4 2023, referenced by EIOPA, revealed that Luxembourg and Sweden account for 69% and 21%, respectively, of all crypto-asset-related exposures among European insurers.
Other countries, such as Ireland, Denmark, and Liechtenstein, also have smaller shares of crypto-related exposures in the insurance market. These holdings are primarily structured through investment funds, such as exchange-traded funds (ETFs), and are held on behalf of unit-linked policyholders.
Discover more about crypto asset exposure and regulations in the European Union here.
Looking Ahead: A Potential Differentiated Approach for Future Crypto Growth
EIOPA has acknowledged that the proposed policy may need to evolve as the adoption of crypto assets grows over time. While the current capital requirements are intended to address existing risks, a more differentiated approach may be required in the future to accommodate a broader range of tokenized assets and cryptocurrencies that may become mainstream in the financial ecosystem.
EIOPA emphasized that the insurance industry’s exposure to crypto assets is still relatively small, accounting for just 655 million euros, or 0.0068% of total European insurance holdings. However, as the crypto market continues to expand, the authority suggested that future regulatory adjustments may be necessary to reflect the changing landscape.
Stay updated on the latest trends in crypto regulation in the EU here.
The proposed 100% capital requirement for crypto assets underscores the European Union's commitment to managing the risks associated with the highly volatile crypto market. By enforcing this measure, EIOPA aims to safeguard both insurers and policyholders, ensuring that European insurers are prepared for the unpredictable nature of cryptocurrency markets. As the global digital asset ecosystem continues to evolve, European regulators are likely to take further steps to refine their approach to crypto regulation.
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