The European Insurance and Occupational Pensions Authority (EIOPA) has proposed mandating full capital backing for insurers’ cryptocurrency holdings, a move aimed at mitigating volatility risks. This proposal could significantly impact the prices of Ethereum and Bitcoin as well as regulatory approaches within the European market. 100% capital reserves are being suggested to counter the high fluctuations in crypto markets, with the aim of protecting policyholders during volatile conditions. 2.26% drop was observed in Ethereum prices and a 1.44% decline for Bitcoin following this announcement. 3.2% decrease in Total Value Locked (TVL) within DeFi protocols has been reported due to insurers’ reduced crypto holdings as a result of this proposal, suggesting significant market implications.