The Association of Financial Markets in Europe, a body that represents global and European banks, recently published a paper highlighting the necessity for regulators across 11 jurisdictions in Europe to collaborate in dealing with cryptocurrencies. As the Association highlighted the potential benefits and risks associated with the same, it mentioned that the collaboration of NCAs, EU bodies [like European Banking Authority], European Securities Markets Authority [ESMA], ECB, and EC could bring the EU’s dream of ” Europe fit for the digital age” closer.
The Association laid down five recommendations that can support supervisory convergence on the regulation of crypto-assets in Europe.
- Establish a pan-European taxonomy for the classification of crypto-assets
- Provide clear expectations regarding the process for issuing crypto-assets [such as
authorization, licensing and registration]
- Apply activities-based and technology agnostic regulation
- Apply existing regulation for regulated activities, with any necessary amendments, if required
- Prioritize convergence of regulatory frameworks with other global and regional
According to the Association, a harmonized pan-European taxonomy for crypto-assets would be a crucial step towards understanding the tech and providing regulatory certainty for cross-border activities. Similarly, guidance and regulations agnostic to the technology and used to undertake the crypto-assets must address the risks of such activities.
The Association in its paper provided an overview of several European NCA regulatory approaches that reflected convergence and divergence, while putting forward two main approaches of,
- Applying existing regulations to crypto-asset activities which are equivalent to currently regulated activities– Where the Association supported the application of existing norms and regulations where possible and applicable for crypto-assets. However, this could be done only after appropriate consideration of the crypto-asset activity
- Making regulatory adjustments by expanding the perimeter through widening the application of existing regulation and/or creating a bespoke regime for crypto-asset activities which are not equivalent to existing regulated activities– A coordinated pan-European approach could reduce fragmentation and promote harmonization, instead of creating a bespoke regime to cover crypto-assets activities.
The Association concluded by stating the importance of the level of convergence among European NCAs based on crypto-classification and economic functions.
“It is our aim that these recommendations will help protect the financial system, mitigate risks to end users and encourage innovation and competition in relation to cryptoassets.”