For some time now, governments around the world have been planning how to regulate the cryptocurrency market. The European Central Bank (ECB) is pushing for the adoption of unified crypto regulatory development across the European Union.
An Overview of the European Central Bank’s Approach to Regulating Crypto Assets
The regulator claims that it is wrapping up a plethora of international and European regulatory projects. When exactly they will take effect, however, is unclear.
The European Central Bank (ECB) detailed its plan to create unified law to regulate crypto asset usage in the EU on August 17th. As reported by the oversight body, financial institutions are debating whether or not to provide services related to digital assets.
The European Central Bank must therefore guarantee that it offers banks a secure setting in which to conduct such transactions. The ECB added that it is cooperating with other national regulators to ensure uniformity and high standards worldwide.
“At the present time, there is no EU-wide crypto law that regulates both crypto activities and the services that support them. Nonetheless, the ECB promised that would change once ongoing proposals for international and European regulation were finalized.
In addition, the agency brought up the MiCA (markets in crypto-assets) bill, which is intended to regulate the cryptocurrency market. The global Basel Committee on Banking Supervision is planning to issue recommendations for banks’ crypto-related risk exposure.
The European Central Bank Is Evaluating Cryptocurrency Risks
The central bank also brought up the different crypto regulatory environments across Europe. It’s important to note that each country has its own unique set of requirements and processes for obtaining a license. In order to achieve consistency, the ECB is actively working towards harmonization.
In addition, the central bank has stated that it is studying the potential dangers of cryptocurrency. The bank has identified risks associated with crypto assets, including cyber and operational risks. The past few months have seen the emergence of these threats.
The regulator further emphasized the importance of internal governance processes that take into account the AML and CFT risk profile of crypto.
In addition, ECB President Christine Lagarde warned in June that both DeFi and crypto assets pose serious risks to the global economy. If the cryptocurrency industry keeps expanding without oversight, this would be in agreement with her, she says.
This means that governments must act as intermediaries between the rest of the economy and the more traditional financial system. That way, people won’t abandon banking for cryptocurrency and other new forms of digital currency.
However, the central bank did not provide a timeline for when these initiatives would be implemented. Furthermore, some European countries have griped that they are unable to leave the crypto sector unregulated for the time being.