ESMA: crypto-assets need common EU-wide approach
10 January 2019 Brussels
Image: Shutterstock
The European Securities and Markets Authority (ESMA) has advised EU institutions that crypto assets need a common EU-wide approach to ensure investor protection.
The advice clarifies the existing EU rules applicable to crypto-assets that qualify as financial instruments and provides ESMA’s position on any gaps and issues in the current EU financial regulatory framework for consideration by EU policymakers.
ESMA has identified that for crypto-assets that qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID), there are areas that require potential re-consideration of specific requirements to allow for an effective application of existing regulations.
Additionally, ESMA added that where these assets do not qualify as financial instruments, the absence of applicable financial rules leaves investors exposed to substantial risks.
At a minimum, ESMA suggested that Anti Money Laundering (AML) requirements should apply to all crypto-assets and activities involving crypto-assets.
Meanwhile, there should also be appropriate risk disclosure in place, so that consumers can be made aware of the potential risks prior to committing funds to crypto-assets.
Steven Maijoor, chair of ESMA, said: “Our survey of National Competent Authorities highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply.”
He continued: “However, because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements and certain requirements are not adapted to the specific characteristics of crypto-assets.”
“Meanwhile, a number of crypto-assets fall outside the current financial regulatory framework. This poses substantial risks to investors who have limited or no protection when investing in those crypto-assets”
Maijoor added: “In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.”
The advice clarifies the existing EU rules applicable to crypto-assets that qualify as financial instruments and provides ESMA’s position on any gaps and issues in the current EU financial regulatory framework for consideration by EU policymakers.
ESMA has identified that for crypto-assets that qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID), there are areas that require potential re-consideration of specific requirements to allow for an effective application of existing regulations.
Additionally, ESMA added that where these assets do not qualify as financial instruments, the absence of applicable financial rules leaves investors exposed to substantial risks.
At a minimum, ESMA suggested that Anti Money Laundering (AML) requirements should apply to all crypto-assets and activities involving crypto-assets.
Meanwhile, there should also be appropriate risk disclosure in place, so that consumers can be made aware of the potential risks prior to committing funds to crypto-assets.
Steven Maijoor, chair of ESMA, said: “Our survey of National Competent Authorities highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply.”
He continued: “However, because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements and certain requirements are not adapted to the specific characteristics of crypto-assets.”
“Meanwhile, a number of crypto-assets fall outside the current financial regulatory framework. This poses substantial risks to investors who have limited or no protection when investing in those crypto-assets”
Maijoor added: “In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.”
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