ECB Harmonizing Regulatory Framework Governing Crypto Activities

ECB Harmonizing Regulatory Framework Governing Crypto Activities

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

The ECB's Regulatory Plan for Crypto Assets

The European Central Bank (ECB) outlined its plan to harmonize the regulatory framework governing crypto activities and services in the EU on Wednesday. The regulator explained that banks are increasingly considering offering crypto products and services, and it is the role of the ECB to "ensure they do so safely and soundly."

The ECB described that it works closely with national regulators "to ensure a consistent approach and high standards across countries," explaining,

"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 at the European and international level," the ECB said, mentioning the markets in crypto-assets (MiCA) proposal to regulate the crypto sector in the EU. Internationally, the Basel Committee on Banking Supervision plans to issue its rules on the prudential treatment of crypto exposures for banks.

The ECB pointed out that the regulatory frameworks for crypto "diverge quite extensively" between EU countries. For example, certain crypto activities are subject to a banking license requirement in Germany. Several banks have requested authorization to conduct crypto activities in their countries, the ECB said, adding,

"It is in this context that the ECB is taking steps to harmonize the assessment of licensing requests." The ECB also said that it is working on assessing the risks posed by crypto assets, stating,

"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."

In addition, "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," the European regulator said.

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 crypto-asset markets and services continues... and the interconnectedness with both the traditional financial sector and the broader economy is intensified."