Financial regulators in Europe have issued a press statement calling for the increased regulation of Cryptoassets to safeguard investors’ funds. The EU Financial Stability Board's (FSB) statement urged global regulators to act with a renewed sense of urgency.The group exchanged views on jurisdictions’ approaches to the regulation, supervision and oversight of crypto-asset activities and markets and stablecoin arrangements.
The statement did not explicitly mention FTX’s recent implosion, but industry experts are quick to point out that it has to do with the exchange.
the FSB Europe Group statement read.
“In light of recent developments, decentralized finance, trading platforms, and so-called crypto conglomerates and exchanges that vertically integrate multiple functions deserve urgent regulatory attention,”
Recent regulatory advancements, such as the EU’s markets in crypto-assets (MiCA) proposal and Japan’s law to regulate stablecoins for investor protection, show there is a growing appetite for industry clarity. Meanwhile, the UK has recently concluded a consultation into its regulatory approach to cryptoassets and stablecoins, and in September the US released its first-ever framework for American crypto regulation. The U.S. appears to be the region expecting a barrage of stricter regulations, with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) clamoring for new regulations.
“Look, I think that investors need better protection in this space,” said Gensler. “But I would say this, this is a field that’s significantly non-compliant.”
European Union officials recently took the next step in crafting a comprehensive framework to govern digital assets. The legislation focuses more on stablecoins and other digital asset trading, but leaves the door open for further rulemaking on decentralised finance (DeFi) and non-fungible tokens (NFTs) by the European Banking Authority and other financial regulators.
The rule making is the result of official “trilogue” discussions between the European Parliament, European Commission and European Council, which concluded on June 30. Unusually, parts of the Recital were intentionally left open for further discussion despite receiving initial tri-institutional approval.
Currently, the size of cryptoassets linked to assets other than EU currencies is constrained by a “tough limit,”. The goal of the provisions limiting stablecoins is to protect and encourage the use of euro-denominated stablecoins like e-money.com which currently supports several European currency-backed stablecoins such as the EEUR, the ECHF, and tokens backed by Scandinavian currencies (ENOK, EDKK, and ESEK), rather than the dollar-denominated coins that currently dominate the market.
With digital assets, the FSB has previously adopted a passive stance on the asset class. The financial regulator stated that while they are inherently risky, digital assets do not pose significant risks to the broader financial markets as it perceived them to be a niche asset class.
The FSB cited its central bank group on stablecoins, saying that they pose significant risks to investors and called for new rules to regulate the asset class. The board recommends applying banking regulation to the industry with the prescription of a “same activity, same risk, same regulation” strategy.
Members agreed that the FSB’s recently published consultative reports are a major step towards establishing a robust international framework to identify, monitor and address financial stability risks from crypto-asset activities.
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