The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) on Wednesday 9 January called on the European Commission to carry out an in-depth assessment of the opportunities and risks associated with crypto assets and to consider, if necessary, a legislative initiative.
In a new report, the EBA reiterates the conclusions of the Financial Stability Board that crypto-actives do not currently pose a risk to global financial stability (see EUROPE 12068).
However, it concludes that crypto-assets are generally outside the scope of European banking, payment and electronic money legislation, creating risks for consumers, risks of money laundering or even a level playing field between Member States.
While the three European Financial Supervisory Authorities (ESAs) have increased consumer warnings (see EUROPE 11959) and MEPs voted last November (see EUROPE 12137) in favour of a framework for virtual currencies at EU level, the European Commission has remained very cautious on the issue. First advocating an international response, she waited for this firm footing evaluation before deciding in which direction to go (see EUROPE 11969).
For the EBA, the Commission should start with a thorough cost-benefit analysis in order to determine the appropriate response at EU level. Such an analysis should, in her view, be done through a "holistic and balanced" and activity-based approach.
The EBA further points out that a "technology-neutral and time-proof approach" would be desirable if an EU-wide proposal is to be developed and advocates coordination with international bodies in this process.
In an opinion delivered on the same day, ESMA goes even further and suggests that the European institutions implement a tailor-made regime for certain categories of crypto-actives that cannot be qualified as financial instruments.
Such a regime could provide for different requirements depending on the characteristics of the crypto-assets, for example, by distinguishing between those with little connection to financial markets and which can only be traded for certain goods or services and those that allow payment to be made, explains the authority.
Nevertheless, it recommends, at this stage, to focus this regime on warning consumers about risks, rather than to put in place broader regulation that could legitimise these crypto-actives and encourage their development on a larger scale.
With regard to crypto-assets that can be qualified as financial instruments under MiFID II, ESMA is of the opinion that certain areas require an interpretation or possible reconsideration of the specific requirements to enable the existing regulations to be applied effectively to these assets. (Original version in French by Marion Fontana)