ECB to create document to regulate activities in the field of cryptocurrencies

What’s new? The European Central Bank (ECB) has outlined its plan to harmonize the regulatory framework governing cryptocurrency activities across the European Union countries. The regulator explained that banks are increasingly considering whether to offer crypto products to their customers, and the ECB’s role is to “ensure they do so safely and soundly.”

Information on the ECB’s website

What else does the ECB say? Representatives of the bank said that they work closely with national regulators “to ensure a consistent approach and high standards across countries.”In this, they clarified that there is currently no harmonized regulatory framework for crypto-asset-related activities and services in the EU. However, they added that the situation will change with the completion of a number of initiatives at the European and international levels. At the international level, the Basel Committee on Banking Supervision plans to issue its rules on the prudential treatment of cryptocurrency risks for banks.

What is the ECB’s work aimed at? The regulator noted that the regulatory frameworks in the field of cryptocurrencies “diverge quite extensively” between EU countries. In Germany, for example, some crypto activities are subject to the requirement to obtain a banking license. Several banks have requested permission to operate in that country. “It is in this context that the ECB is taking steps to harmonize the assessment of licensing requests.” The regulator also stressed that it is working on assessing the risks associated with crypto assets:

“Crypto assets put the spotlight on certain types of risk, starting with operational and cyber risks, and the ECB is also working to assess these. Internal governance arrangements and processes need to take account of the crypto-asset AML/CFT [anti-money laundering/combating the financing of terrorism] risk profile of the institution.”

In June, the head of the ECB Christine Lagarde demanded stronger regulation of bitcoin and decentralized finance (DeFi). According to her, given the rapid development of the digital asset sector, a second regulation similar to the Markets in Crypto-Assets Act (MiCA) is needed.