ECB creates regulatory framework for cryptographic activities and services

The European Central Bank (ECB) is working to harmonize the regulatory framework governing crypto-currency activities and services in the EU. The regulator noted that several regulatory initiatives at the European and international levels are being finalized.

ECB’s regulatory plan for crypto assets

The European Central Bank (ECB) on Wednesday outlined its plan to harmonize the regulatory framework governing crypto-currency activities and services in the EU. The regulator explained that banks are increasingly considering offering crypto products and services and that the ECB’s role is to “ensure that they do so in a safe and sound manner.“

The ECB described that it works closely with national regulators.”to ensure a consistent approach and high standards in all countries“, stating:

There is currently no harmonized regulatory framework governing crypto-asset activities and services in the EU.

“This will change with the finalization of several regulatory initiatives in the EU. [the] European and international level“, the ECB detailed, mentioning the proposed Crypto Asset Markets (MiCA) to regulate the crypto-currency sector in the EU. At the international level, the Basel Committee on Banking Supervision plans to publish its rules on the prudential treatment of crypto-currency exposures for banks.

The ECB noted that regulatory frameworks for crypto ” diverge quite widely ” between EU countries. For example, some crypto activities are subject to a banking license requirement in Germany. Several banks have applied for permission to conduct crypto activities in the European country, the ECB said, adding:

It is in this context that the ECB is taking steps to harmonize the assessment of license applications.

The ECB also highlighted that it is working to assess the risks posed by crypto-assets, stating:

Crypto-assets highlight certain types of risks, starting with operational risks and cyber risks, and the ECB is also working on assessing them.

In addition, ” internal governance arrangements and processes must take into account the anti-money laundering and anti-terrorist financing (AML/ATF) of crypto-assets “, the European regulator stressed.

ECB President Christine Lagarde said in June that “crypto-assets and decentralized finance (defi) have the potential to pose real risks to financial stability.“She added:”This would be particularly the case if the rapid growth of cryptoasset markets and services continues…and if interconnection with the traditional financial sector and the broader economy increases.“