The banking watchdog of the European Union said last week that new rules may be necessary to stop the existing regulation on digital assets and cryptocurrencies from getting too diverse across the EU.
The European Banking Authority (EBA) published its long awaited assessment of the applicability and suitability of EU law to crypto assets last week. It analyses crypto assets and their use within the EU, as well as the pan-EU laws that govern them.
Cryptoassets such as ether, bitcoin, and tokens that are created in initial coin offerings (ICOs) usually fall outside of the scope of the EU’s financial legislation.
The EBA said that the fact that the laws regarding crypto assets are not uniformly applied across the EU implies that various companies will flock to so-called regulatory havens, such as Gibraltar and Malta, where blockchain and crypto businesses face less stringent compliance.
This creates an unfair competitive environment, the EBA states in its report. “The EBA calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto assets,” said executive director Adam Farkas.
The fact that the laws regarding crypto assets are not uniformly applied across the EU implies that various companies will flock to so-called regulatory havens, such as Gibraltar and Malta, where blockchain and crypto businesses face less stringent compliance
The EBA is the Union’s main banking authority and is tasked with ensuring banking and other financial regulations are implemented in all EU Member States.
According to the report, cryptocurrencies are currently not regulated by the EBA, meaning that consumers in the EU are more susceptible to manipulation and fraudulent activities that have plagued the industry since its conception.
The EBA called for a comprehensive cost-benefit analysis to be conducted by the EBA in order to determine the course of action that needs to be taken at the EU level. The report comes at a time when anti-money laundering task forces have long pointed out that criminals are exploiting the lack of regulation, according to The Financial Times.
The Financial Action Task Force (FATF) said that targeting money laundering in the crypto industry was its top priority. FATF also called for EU countries to increase their supervision of cryptocurrency exchanges and ICOs, as they are often hot spots for criminal activity.
The EBA called for FATF’s recommendations to be considered by the European Commission, a move that could have a significant impact on the industry as a whole.
The EBA report noted how some countries such as the UK are exploring to impose a ban on crypto derivative products, such as exchange-traded funds that speculate on the prices of cryptocurrencies that are going up or down, to protect the less-educated investors. The asset class is already banned in Germany.