The European Central Bank (ECB) has called for more consistency in the licensing of crypto assets for banks across the Euro-area, as the divergence of crypto laws within the region has led to a fragmented system. The ECB’s annual report, published on Tuesday, revealed that a number of license requests have come from technology-driven banks, and the central bank is seeking to impose more control over the licensing process.
“National frameworks governing crypto-assets vary quite significantly,” the ECB said. “The ECB is taking steps to harmonize the assessment of licensing requests involving crypto-assets.”
According to the report, most applications for crypto-driven banks came from Germany due to requirements under national law, while one application was received from Luxembourg. National supervisors, such as Germany’s BaFin, are responsible for monitoring smaller banks that lie within their borders. However, the ECB has the final right to decide whether to grant or withdraw a license.
The ECB’s move to harmonize licensing requests involving crypto-assets comes as it seeks to prevent an inconsistent system across the Euro-area. The regulator wants to ensure that banks across the region have a level playing field when it comes to licensing.
In February, the ECB warned banks to follow tough new capital standards that could dissuade them from holding unbacked crypto assets like bitcoin (BTC). The regulator found that banks’ exposures to crypto were “insignificant” but highlighted the potential risks associated with holding such assets.
As the ECB seeks to create a more consistent regulatory framework for crypto assets, it remains to be seen how banks across the Euro-area will respond. With the rise of technology-driven banks and the growing popularity of cryptocurrencies, it is crucial that regulators take steps to ensure a level playing field and prevent fragmentation within the sector.