EU to Increase Scrutiny on Crypto This Year
The European Union is aware of the burgeoning influence of cryptocurrencies, but they also realize that there are significant risks for investors – both institutionals and retailers – and their next step is solving them. This might be the conclusion of two separate reports, published today, both of which find that the protection of potential customers is currently the most pressing issue in regulating the cryptocurrency space.
The first report, published by the European Banking Authority (EBA), features the results of its assessment of the applicability and suitability of EU law to crypto-assets. The conclusion they have come to is that not all crypto-related activity is currently covered under the EU financial services law, and that crypto assets also give rise to other issues which are beyond the scope of competence of the EBA (e.g. regarding accounting and tax treatment).
Therefore, the EBA concludes that the European Commission should decide whether there is need to address these issues, advising that such an assessment should take into account the possibilities of using blockchain and cryptocurrencies beyond the constraints of the financial sector. In the meantime, the EBA intends to develop a framework for dealing with crypto-assets from monitoring crypto-related activities to establishing a regulatory basis throughout the year.
Meanwhile, the European Securities and Markets Authority (ESMA) also published its Advice to the European Union (EU) Institutions – Commission, Council and Parliament – on initial coin offerings and crypto-assets. They also recognize the lack of consumer protection as the most pressing issue to be tackled throughout 2019, adding, “At a minimum, ESMA believes that Anti Money Laundering (AML) requirements should apply to all crypto-assets and activities involving crypto-assets.”
Steven Maijoor, Chair at ESMA, said, “In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.”
The official report adds, “ESMA considers it important to take a technology-neutral approach, to ensure that similar activities and assets are subject to the same or very similar standards regardless of their form.”
This means that, according to ESMA, the regulations made by the EU should be applicable to all member countries, across all crypto-related technologies, and will focus on customer protection for the time being. They add, “ESMA has noted that some Member States have or are considering some bespoke rules at the national level for all or a subset of those crypto-assets that do not qualify as MiFID [The Markets in Financial Instruments Directive] financial instruments. While ESMA understands the intention to bring to the topic both a protective and supportive approach, ESMA is concerned that this does not provide for a level playing field across the EU. ESMA believes that an EU-wide approach is relevant, also considering the cross-border nature of crypto-assets.”
Moreover, ESMA stressed that the development of tokenisation, i.e., the representation of traditional assets on DLT (distributed ledger technology), could bring benefits, although it is still at a very early stage and important challenges remain.
As for regulations outside of the EU, the Winklevoss twins, American entrepreneurs and founders of cryptocurrency exchange Gemini, are taking to the streets of New York to urge for rules in the crypto revolution. The theme of the campaign is ‘The Revolution Needs Rules’, which is based on the core belief of Gemini’s founders that cryptocurrency is a revolutionary force that will forever change how money works, but that it also needs to be regulated and secure in order for that revolution to be successful.
Throughout the week, a Gemini-branded crypto bus will travel the streets of New York City – up and down crypto alley in the Flatiron neighborhood and through the financial corridors in midtown and downtown. Gemini staff, including the Winklevosses, will join the bus at a parked location to speak with New Yorkers about cryptocurrency in a Q&A-style format.
— Gemini (@Gemini) January 8, 2019
As reported by Cryptonews.com, 2019 is set to become the year in which crypto-regulation becomes more widespread, more formal, and more international. This could open up new possibilities for the crypto industry as it becomes more legitimate, yet as the experts informed us, it could also close off some previously lucrative areas of activity.