In this report, the European Banking authority (EBA) advises the Commission that they should carry out a 'comprehensive cost/benefit analysis' to determine whether any regulatory action is required to cover crypto-assets.
Crypto-assets, virtual currencies, crypto-currencies are a new and unregulated field and, which, together with the emergence of Initial Coin Offerings (ICOs) as a way to raise funds, has caused some concerns among regulators. As a result, the European Commission asked the EBA to look into the sector and report with its advice.
The report makes the following findings:
- Currently activity in crypto-assets is limited in the EU though expected to rise.
- Most crypto-assets typically fall outside current EU financial services regulation.
- These assets do, potentially, raise concerns over consumer protection, operational resilience and market integrity.
The Report tracks the emergence of crypto-assets and analyses whether they fall within the E-money Directive or the Payment Services Directive 2. (Note that European Securities and Markets Authority (ESMA) has also done an analysis re whether they may be 'financial instruments' under MiFID)
The EBA notes that there has been uncertainty about the applicability of current financial services law, which has led to diverging approaches in different countries. Also, some national jurisdictions have taken action in issuing warnings to consumers or are considering banning the sale of some products.
The Report also examines the availability of accounting and prudential supervisory powers which cover the activities of financial institutions dealing with crypto-assets.
In conclusion, the EBA expects the use of crypto-assets to continue to evolve rapidy and advises continued monitoring as well as a cost/benefit analysis.