Last week, on the same day the European Securities and Markets Authority (ESMA) published a report on digital assets sharing their perspective with the European Commission (EC), the European Banking Authority (EBA) did the same.
The EBA said that crypto-asset-related activity in the EU is “relatively limited” and does not appear to “give rise to implications for financial stability.”
The EBA’s Executive Director, Adam Farkas, commented on the report stating:
“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.”
The EBA is an independent EU Authority that seeks to ensure “effective and consistent prudential regulation and supervision across the European banking sector.” Its main task is to foster harmonized rules for financial institutions across the EU.
The report on cryptoassets states that presently most of these offerings fall outside the scope of existing EU financial services rules. Specific services relating to “crypto-asset custodian wallet provision and crypto-asset trading platforms do not constitute regulated activities under EU financial services law.”
The lack of specific rules for crypto and the fact that individual member states are creating bespoke rules is creating a problem for Europe, according to the EBA.
So what does the EBA suggest the European Commission do?
“The EBA advises the European Commission to carry out a cost/benefit analysis to assess, on a holistic basis, whether EU-level action is appropriate and feasible at this stage to address the issues identified. Such a cost/benefit analysis should take account of the potential application of DLT and crypto-assets beyond the financial sector, and should extend to aspects relating to the environmental impact of some crypto-asset activity. The EBA also advises the European Commission to have regard to the latest recommendations and any further standards or guidance issued by the FATF as part of a holistic review of the need, if any, for action at the EU level, and calls on the Commission to take steps where possible to promote consistency in the accounting treatment of crypto-assets.”
The EBA said it will continue to review the crypto-asset sector and they stand ready to support the EC with further analysis.
The EBA says it pursue the following:
- The development of a common monitoring template which competent authorities can issue to institutions, payment institutions and electronic money institutions (and, as appropriate, other financial institutions) to monitor the level and type of crypto-asset activity underway.
- The assessment of business practices of institutions, payment institutions and electronic money institutions regarding crypto-asset advertisings and the disclosure of the rights and safeguards applicable to consumers in the context of any crypto-asset services provided by those institutions to assess what actions are needed to ensure high standards of consumer protection.
- Report to the European Commission on the conclusion of the BCBS work with regard to the prudential treatment of banks’ holdings of/exposures to cryptoassets
- Keep under review the need for any guidance to support a common application of the current prudential rules under the CRD/CRR as regards institutions’ exposures to/holdings of crypto-assets.
- Carry out continuous monitoring of innovation and of the regulatory perimeter, including with regard to crypto-asset activities.
The EBA report is below.