The European Banking Authority (EBA), a regulatory agency under the European Union (EU) headquartered in London, is calling for pan-EU rules on cryptocurrencies.
In an official report on crypto laws submitted by the EBA to the European Commission, the regulatory agency deduced that the introduction of multiple conflicting crypto legislation across European territories could potentially result in the exploitation of both investors and consumers.
As the regulator agency explained in the report:
“Typically crypto-assets fall outside the scope of EU financial services regulation. Moreover, divergent approaches to the regulation of these activities are emerging across the EU. These factors give rise to potential issues, including regarding consumer protection, operational resilience, and the level playing field.”
Furthermore, the regulatory agency proposed the development of unified crypto legislation under the commission’s supervision as its influence extends far beyond the banking sector.
The EBA’s released report echoes previous concerns raised by the Financial Action Taskforce (FATF) underscoring the risk that comes with flimsy crypto legislation which may be exploited by money launderers and fraudsters. As the financial regulator stated in October last year, among its top priority for this year is the prevention and mitigation of crypto-related money laundering. To that end, FATF is calling on nations to step up their supervision on crypto startups, including crypto trading platforms, digital wallet providers, as well as firms launching initial coin offerings (ICO).
As FATF president Marshall Billingslea stated:
“By June, we will issue additional instructions on the standards and how we expect them to be enforced.”
FATF’s recommendations to the commission were further promoted by the EBA, as both share a common objective of establishing an intragovernmental method of monitoring and reporting illicit financial activities involving cryptocurrencies.
In addition, the regulator also stressed the need to implement a broader approach in an effort to curb the adverse impact of crypto mining on the environment, as such operations expend massive amounts of energy.
As the EBA went on explaining:
“Given the pace and complexity of change, it would be desirable for a technologically neutral and future-proof approach to be adopted in developing any proposals should it be concluded that EU-level action is needed.”
Should EBA’s initiative be accordingly followed through, the move could pave the way for a clearer and more solid regulatory framework for crypto startups, lending credibility to the industry, thereby promoting confidence among venture capitalists and other institutional investors that remain ambivalent towards entering the crypto sphere over concerns of potential legal risks.
Until the European Commission has outlined a unified framework that would govern the crypto industry, the EBA stated that it will retain its existing monitoring template to assist national regulators on aggregating data from firms. Furthermore, the EBA has also disclosed plans of exploring other crypto business models to ascertain which falls under the financial watchdogs’ supervision.