EU Watchdogs Call For Wider Crypto Rules

Cryptocurrency and ICO rules at the EU level seem to be gripping tight. Two major European regulators have recommended a set of rules.

ESMA and its Recommendations

First, the European Securities and Markets Authority (ESMA) advised different institutions of the European Union including the Parliament, the Commission and the Council on areas related to cryptocurrency assets and initial coin offerings.

Although the sector is modest in size and currently shows no risks related to financial stability, ESMA highlighted the associated risks concerning market integrity and investor protection.

In addition, the report went against legitimizing cryptocurrencies on the pretext of a survey which indicated that the crypto-assets should be in line with anti-money laundering legislation.

According to ESMA:

“Wider regulation of crypto-assets and related activities may have trade-offs, such as risking legitimizing crypto-assets and encouraging wider adoption.”

The watchdog recommended that there is a need to protect the capital markets by setting up appropriate regulatory frameworks.

The ESMA chair, Steven Maijoor, said:

 “Our survey of NCAs highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply. However, because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements and certain requirements are not adapted to the specific characteristics of crypto-assets.”

EBA and its Recommendations

The second recommendation came from the European Banking Authority (EBA), which has asked the European Commission to examine if there is a need for unified crypto rules across the region.

A report was published on Tuesday by EBA which said that the asset activities related to crypto are not currently covered under the existing EU financial laws and since these activities are highly risky, there is an immediate need to enforce the proper rules to protect the interests of the investors.

Following this, EA has ordered to conduct a comprehensive analysis. The EBA’s executive director, Adam Fracas, said in a statement:

“The EBA’s warnings to consumers and institutions on virtual currencies remain valid. The EBA calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto-assets. The EBA continues to monitor market developments from a prudential and consumer perspective.”

Is the Crypto Industry in Europe in Danger?

The reports by the two watchdogs aim to tighten the cryptocurrency regulations in Europe. However, the ESMA report could prove to be advantageous for the industry if it is adequately acted upon. Let’s not forget that the EU has so far come up with welcoming cryptocurrency and blockchain regulatory policies which have made crypto hubs like Luxemburg, Liechtenstein and the Netherlands to flourish.

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