On Wednesday, the European Central Bank (ECB) laid out its strategy for synchronizing the legal framework regulating crypto-related activities and services throughout the EU. The regulator said it is the ECB’s responsibility to “ensure they do so safely and soundly” as banks are increasingly debating whether to provide cryptocurrency products and services.
To “ensure a consistent approach and high standards across nations,” the ECB stated that it collaborates closely with national authorities.
The ECB explained that this will change with the completion of many regulatory initiatives at [the] European and international levels while highlighting the markets in crypto-assets (MiCA) proposal to regulate the cryptocurrency sector in the EU.
The Basel Committee on Banking Supervision intends to publish its regulations regarding how prudential banks should address their crypto exposures.
The ECB noted that the legal foundations for cryptocurrencies “diverge quite extensively” amongst EU nations. For instance, in Germany, a banking licence is necessary for a certain type of cryptocurrency activity. Numerous banks have applied for permission to engage in cryptocurrency business in the European nation.
By adding that “Crypto assets put the spotlight on certain types of risk, starting with operational and cyber risks, and the ECB is also working to assess these,” the ECB further stressed that it is actively analysing the risks posed by crypto assets.
“This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified,” ECB President Christine Lagarde said in June. Decentralized finance (defi) and crypto assets have the potential to pose serious dangers to financial stability, according to Lagarde.
The European regulator recognized the significance of reporting for crypto-asset AML/CFT anti-money laundering and combating terror financing in corporate governance systems.