The collapse of crypto exchange FTX in November 2022 has reinforced the idea of a need for European regulation on markets in crypto-assets, according to MEPs on the Committee on Economic and Monetary Affairs.
For Stefan Berger (EPP, German), rapporteur on the proposed ‘MiCA’ regulation governing the European markets in crypto-assets (see EUROPE 13040/35), the responsibility for the collapse lies solely with Samuel Bankman-Fried, the founder of FTX, and governance failures, not with blockchain technology. He called for a vote as soon as possible “to exclude from the outset such moves in the European market”. “A global ‘MiCA’ would be ideal”, he said.
Similarly, Alexandra Jour-Schroeder, Deputy Director-General of the Directorate General for Financial Stability and Capital Markets (DG FISMA) at the European Commission, has criticised FTX’s highly questionable practices. She warned that “crypto-assets markets are global, interconnected and mobile”. “Therefore we have to be very vigilant that our EU protections should not be undermined by jurisdictions that ultimately fail to regulate and supervise their companies causing risk and compromising market integrity”, she said.
However, MEPs pointed out that FTX had a ‘MiFID licence’, i.e. it was authorised to operate on the European market, in accordance with the Financial Markets Instruments Directive.
Steffen Kern, chief economist and head of risk analysis at the European Securities and Markets Authority (ESMA), explained that as the MIFID licence in Cyprus fully covered MIFID services and transactions, but was not suitable for crypto-assets, it was suspended by the Cypriot authorities on 9 November.
He agreed that despite many problems in the crypto-assets market, such as market abuse, lack of oversight and aggressive advertising to retail customers, the crypto-asset industry is still not properly supervised.
Given the volatility of the cryptocurrency markets and the rapid changes in the market, MEPs discussed MiCA’s ability to deal with cryptocurrency conglomerates, and the regulatory tools that can address the current threats before the law comes into force in 2024.
They also urged ESMA to use its product intervention powers, where possible, to block certain crypto products that threaten the Single Market and investor protection in the EU. (Original version in French by Anne Damiani)