ECB begins enforcing due-diligence criteria on crypto
This post on CoinTelegraph summarizes the current position of the ECB (European Central Bank) on digital assets. As many readers will already know, the Eurozone has active regulators and lots of them, as each country must ratify what is proposed by the EC. In this case, we are talking about the licensing process for companies that want to trade with Cryptos. The regulation referred to is MiCA (Markets in Crypto Assets), which applies to all cryptocurrency-related companies or individuals who wish to offer their coins, assets or services in Europe. The scope involves several categories of agents, including custodians and administrative services in the cryptocurrency industry. Also, all trading platforms, exchanges (either fiat to crypto or crypto to crypto) and asset issuers are subject to MiCA. The ECB will be an entity that assesses these companies as part of its core licensing review responsibilities, at least as far as we understand it.
“In a statement on Wednesday, the ECB’s banking supervision department said it will take steps to regulate digital assets as “national frameworks for cryptoassets diverge quite widely” and given the apparently divergent approaches to harmonization following the transition to the Markets for Crypto Assets (MiCA) regulation and the Basel Committee on Banking Supervision issues guidelines for banks’ exposure to crypto. The ECB said it would apply criteria from the Capital Requirements Directive – which has been in place since 2013 – to assess license requests for crypto-related activities and services.
While we are not privy to all the details of MiCA, the ECB is simply pointing to some of the due diligence criteria that will be used when license reviews are underway. Cryptos are still relatively new, and this particular legislation won’t be fully rolled out until 2024 anyway. The piece also points out that the ECB recently released a study favoring a CBDC over decentralized cryptos or even stablecoins as a means of x-border payments . We recently covered B2B uses for crypto in a member survey paper. Those interested should read it quickly and dig into more detail.
“The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the crypto field should be,” the ECB said. “Senior managers or board members with relevant IT knowledge and chief risk officers with solid experience in this area are important safeguards.”…According to the ECB, there is “work in progress” to analyze the role crypto can play in Europe, which will “Remain a focus area for European banking supervision in the coming years.” With the passage of MiCA, global regulators can begin to standardize rules for crypto service providers in the EU.
Overview after Steve Murphydirector, commercial and corporate payment advisory service at Mercator Advisory Group.
