The European Central Bank is working towards harmonizing the regulation framework governing cryptocurrency activities and services within the EU. The regulator mentioned that numerous regulatory initiatives are currently being developed at both the European and International levels.
ECB’s Regulatory Plan for Crypto Assets
Wednesday saw the European Central Bank (ECB), which outlined their plan for harmonizing the EU’s regulatory framework governing crypto services and activities. The regulator explained that banks are increasingly considering whether to offer crypto products and services, and it is the ECB’s role to “ensure they do so safely and soundly.”
The ECB described that it works closely with national regulators “to ensure a consistent approach and high standards across countries,” elaborating:
There are currently no common regulations governing services and crypto-asset activity in the EU.
“This will change with the finalization of several regulatory initiatives at [the] European and international level,” the ECB detailed, mentioning the markets in crypto-assets (MiCA) proposal to regulate the crypto sector in the EU. Internationally, The Basel Committee on Banking Supervision intends to publish its rules on how banks should treat crypto exposures.
The ECB pointed out that the regulatory frameworks for crypto “diverge quite extensively” between EU countries. Certain crypto activities, for example, are required to obtain a German banking license. The ECB stated that several banks had requested permission to carry out crypto-related activities in Europe.
The ECB takes steps in this direction to standardize licensing request assessment.
The ECB stressed that crypto assets pose risks, and stated:
The spotlight is on crypto assets, which highlight certain types of risks. These include cyber and operational risk.
In addition, “internal governance arrangements and processes need to take account of the crypto-asset AML/CFT [anti-money laundering/combating the financing of terrorism] risk profile of the institution,” the European regulator stressed.
ECB President Christine Lagarde said in June that “crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability.” She added: “This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified.”
How do you feel about the ECB’s efforts to establish a unified regulatory framework for crypto assets. Comment below.
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