The European Central Bank (ECB) is working to harmonize the regulatory framework for crypto activities and services in the EU. The regulator noted that several regulatory initiatives at European and international level are being finalized.
The ECB’s regulatory plan for crypto assets
The European Central Bank (ECB) outlined its plan to harmonize the regulatory framework for crypto activities and services in the EU on Wednesday. The regulator explained that banks are increasingly considering whether to offer crypto products and services, and it is the ECB’s role to “ensure that they do so safely and soundly.”
The ECB described that it works closely with national regulators “to ensure a consistent approach and high standards across countries,” elaborating:
There is currently no harmonized legislation regulating activities and services for crypto-assets in the EU.
“This will change with the completion of several regulatory initiatives at [the] European and international level,” the ECB detailed, mentioning the proposals for the Markets in Crypto Assets (MiCA) to regulate the crypto sector in the EU. Internationally, the Basel Committee on Banking Supervision plans to issue its rules on prudent handling of crypto exposures for banks.
The ECB pointed out that the regulatory frameworks for crypto “diverge quite a bit” between EU countries. For example, certain crypto activities are subject to a banking license requirement in Germany. Several banks have requested authorization to conduct crypto activities in the European country, the ECB said, adding:
It is in this context that the ECB is taking steps to harmonize the assessment of license requests.
The ECB also emphasized that it is working to assess the risks posed by cryptoassets, saying:
Crypto-assets spotlight certain types of risk, starting with operational risk and cyber risk, and the ECB is also working to assess these.
In addition, “internal governance arrangements and processes must take into account crypto-assets AML/CFT [anti-money laundering/combating the financing of terrorism] the risk profile of the institution,” the European regulator emphasized.
ECB President Christine Lagarde said in June that “cryptocurrency and decentralized finance (defi) have the potential to pose real risks to financial stability.” She added: “This will especially be the case if the rapid growth of markets and services for cryptoassets continues … and the interconnection with both the traditional financial sector and the wider economy intensifies.”
What do you think about the ECB working to create a harmonized regulatory framework for cryptoassets? Let us know in the comments section below.
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