The European Union's planned laws for crypto assets are insufficient, and safeguards must be enhanced to effectively capture risks, according to European Central Bank supervisory board member Elizabeth McCaul on Wednesday.
The European Parliament will vote on the Markets in Crypto-assets (MiCA) bill later this month, taking a significant step towards giving supervision of the crypto industry following a series of scandals and failures.
“While the new Basel standard and MiCA are important milestones, I am afraid they will not be sufficient on their own,” McCaul said in a blog post.
“In line with the principle of proportionality, significant crypto-asset service providers should be subject to both stricter requirements and enhanced supervision: neither of the two is catered for by MiCA,” she argued.
Another difficulty is how the scale of crypto-asset service providers is defined, because the now-defunct crypto exchange FTX would not have been considered substantial given how the firm was structured.
“In fact Binance, which is the largest crypto player, is alleged to have between 28 million and 29 million active users worldwide, but would probably not even meet the threshold to be classified as significant in the EU,” McCaul said.
Over the past year, the crypto world has been rocked by high-profile failures, bankruptcies, and fraud, but the value of many assets has soared in the last month as concerns about the sustainability of the banking industry drove some to move away from bank accounts.
McCaul claimed that new quantitative measurements that take into account the type of firm, such as volume for trading platforms or assets under custody for custodial businesses, are required.
Given the complexity of activities, she stated that thresholds should be measured at the group level rather than the individual entity level. The same is true for conflicts of interest, which must be identified across the organisation and at related firms, according to McCaul.
By fLEXI tEAM