ESMA Publishes Advice on Rules Applicable to Crypto Assets
ESMA published its advice to the EU Institutions (European Commission, Council, and Parliament) on initial coin offerings and crypto-assets. The advice clarifies the existing EU rules applicable to crypto-assets that qualify as financial instruments and outlines the position of ESMA on any gaps and issues in the current EU financial regulatory framework for consideration by EU policymakers.
The gaps and issues fall into two categories:
- For crypto-assets that qualify as financial instruments under MiFID, there are areas that require potential interpretation or re-consideration of specific requirements to allow for an effective application of the existing regulations
- Where these assets do not qualify as financial instruments, the absence of applicable financial rules leaves investors exposed to substantial risksESMA believes that Anti Money Laundering (AML) requirements should apply to all crypto-assets and activities involving crypto-assets. There should also be appropriate risk disclosure in place to make consumers aware of the potential risks prior to committing funds to crypto-assets.
ESMA opines that crypto-assets raise specific challenges for regulators and market participants, as there may be a lack of clarity about how the regulatory framework applies to such instruments. Where it does apply, there may be areas where crypto-assets require potential interpretation or re-consideration of specific requirements to allow an effective application of regulations. Where regulation does not apply to crypto-assets and related activities, regulators need to consider whether it should, and if so how. ESMA considers it important to take a technology-neutral approach, to ensure that similar activities and assets are subject to the same or very similar standards regardless of their form.
ESMA has been working with national competent authorities on analyzing the different business models of crypto-assets, the risks and potential benefits that they may introduce, and how they fit within the existing regulatory framework. ESMA’s work on crypto-assets has highlighted a number of issues that are beyond the remit of ESMA. The advice allows the EU Institutions to consider possible ways in which the noted gaps and issues may be addressed and subjected to further analysis. ESMA will continue to actively monitor market developments in the area of crypto-assets while cooperating with national competent authorities and global regulators.
Related Links
Keywords: Europe, EU, Banking, Securities, Crypto-assets, Regtech, Fintech, Distributed Ledger Technology, ESMA
Previous Article
IA Issues QIS 3 Package for Development of Risk-Based Capital RegimeRelated Articles
APRA Issues Interim Update to Policy Priorities for 2021 and Beyond
In a letter addressed to the industry, the Australian Prudential Regulation Authority (APRA) set out an updated schedule of policy priorities for the banking, insurance, and superannuation industries.
EC Adopts Solvency II and Resolution Rules Package for Insurers
The European Commission (EC) adopted a comprehensive review package of Solvency II rules in the European Union.
OCC Issues Booklets on Regulatory Reporting and Earnings
The Office of the Comptroller of the Currency (OCC) issued Versions 1.0 of the "Earnings" and "Regulatory Reporting" booklets of the Comptroller's Handbook.
ECB Sets Out Results of Economy-Wide Climate Stress Tests
The European Central Bank (ECB) published results of its economy-wide climate stress test, which aimed to assess the resilience of non-financial corporates and euro area banks to climate risks.
EBA Examines Implications of Increasing Use of Digital Platforms in EU
The European Banking Authority (EBA) published a report on the use of digital platforms in the banking and payments sector in European Union.
HKMA Issues Updates on Policy Measures Intended to Ease COVID Impact
The Hong Kong Monetary Authority (HKMA) published updates on the policy measures that were announced in context of the ongoing pandemic.
ISDA Responds to BCBS Proposal on Treatment of Cryptoasset Exposures
The International Swaps and Derivatives Association (ISDA), along with several other associations, submitted a joint response to the Basel Committee on Banking Supervision (BCBS) consultation on preliminary proposals for the prudential treatment of cryptoasset exposures.
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
