EU’s Proposed Crypto Regulations Criticized by ECB Board Member
In a recent blog post, Elizabeth McCaul, a member of the European Central Bank supervisory board, criticized the proposed regulations for crypto assets by the European Union, saying that they do not go far enough and that safeguards need to be strengthened to capture risks adequately.
Later this month, the European Parliament is scheduled to cast its vote on the Markets in Crypto-assets (MiCA) legislation, regarded as a noteworthy move towards regulating the cryptocurrency realm in the wake of several scandals and collapses. Despite this development, McCaul argues that relying solely on MiCA and the new Basel standard would be inadequate.
According to her perspective, it is necessary to impose more stringent obligations and increased monitoring on notable crypto-asset service providers. McCaul observes that the current MiCA regulations fail to adequately address either aspect.
To ensure better scrutiny and control over the cryptocurrency sector, she proposes the adoption of new quantitative metrics that consider business specifics, like trading volume for trading platforms or assets under custody for custodian businesses. This approach would enable more precise and efficient supervision of the crypto market.
McCaul additionally highlighted that the scale of crypto-asset service providers is a matter of concern. Even Binance, the biggest player in the cryptocurrency market, boasting around 28 to 29 million active users globally, would likely fall short of the criteria for being classified as significant within the EU.
For instance, the demise of the formerly operational crypto exchange FTX would not have been deemed noteworthy due to the firm’s structure.
Therefore, thresholds needed to be measured at the group level rather than at the individual entity level, given the complexity of operations.
Finally, McCaul emphasized the importance of identifying conflicts of interest across the group and at affiliated entities. This would ensure that oversight and regulation are effective and that the risks associated with crypto assets are properly managed.