EBA published the results of its assessment of the applicability and suitability of EU law to crypto-assets. The report examines the application of current EU banking, payments, e-money, and anti-money laundering laws to crypto-assets and analyzes the crypto-asset custodian wallet providers and crypto-asset trading platforms, building on the July 2014 EBA opinion on virtual currencies. The report also examines the activities of credit institutions, investment firms, payment institutions, and electronic money institutions regarding crypto-assets, along with the associated regulatory and supervisory issues.
The assessment reveals that relatively low level of crypto-asset activity currently observed in the EU does not appear to give rise to implications for financial stability. However, typically, activities involving crypto-assets fall outside the scope of EU banking, payments, and electronic money regulation, though certain risks exist for consumers, which are not addressed at the EU level. As a result of the development of national regulatory responses, divergences between the member states are starting to emerge, presenting risks to the level playing field. Market developments also point to the need for a further review of EU anti-money laundering legislation.
Therefore, EBA sets out, in the report, advice to EC about the need for a comprehensive cost/benefit analysis, taking account of issues inside and outside the financial sector, to determine what, if any, action is required at the EU level at this stage. EBA also advises EC to take account of the October 2018 recommendations of the Financial Action Task Force (and any further standards or guidance) regarding, in their terminology, "virtual asset" activities and to take steps, where possible, to promote consistency in the accounting treatment of crypto-assets. Additionally, EBA sets out a number of steps that it will take in 2019 to enhance the monitoring of institutions' crypto-asset activities and consumer-facing disclosure practices. These steps include 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 advertising, pre-contractual information about risks related to crypto-asset transactions for consumers (lack of legal framework, liquidity risk, and so on), 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 EC on the conclusion of the BCBS work on the prudential treatment of banks’ holdings of/exposures to crypto-assets
- Keep under review the need for any guidance to support a common application of the prudential rules under the Capital Requirements Directive and Regulation (CRD/CRR) regarding institutions’ exposures to/holdings of crypto-assets
- Perform continuous monitoring of innovation and of the regulatory perimeter, including with regard to crypto-asset activities (ongoing)
Keywords: Europe, EU, Banking, PMI, Securities, Regtech, Fintech, Crypto-assets, AML, EBA
Previous ArticleECB Issues Consolidated Guide to Assessments of License Applications
EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.
The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.
In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.
In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.
EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).
ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).
EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.
HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.
EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.
BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.