The European Banking Authority (EBA) has recommended in its report on crypto-assets that the European Commission carry out further analysis to determine the appropriate EU-level response, and has flagged actions the association is to undertake itself.
The report highlights that crypto-asset activities do not typically constitute regulated services within the scope of EU banking, payments and electronic money law, and there are risks which exist for consumers not addressed at the EU level. Crypto-asset activities may also give rise to other risks, including money laundering. In light of these issues. Recognising the rapid evolution in the use of crypto-assets, the EBA examines in the report the application of current EU banking, payments, e-money and anti-money laundering laws to crypto-assets; crypto-asset custodian wallet providers and crypto-asset trading platforms, building on the EBA's July 2014 Opinion on VCs; and, credit institutions, investment firms, payment institutions and electronic money institutions' activities involving crypto-assets and regulatory and supervisory issues. The report concludes the relatively low level of crypto-asset activity currently observed in the EU does not appear to give rise to implications for financial stability. However, the development of divergent national regulatory responses between member states are starting to present risks to the level playing field. Market developments also point to the need for a further review of EU anti-money laundering legislation.
The EBA also advises the European Commission to take account of the October 2018 recommendations of the Financial Action Task Force (and any further standards or guidance) regarding, in their terminology, ‘virtual asset' activities, and to take steps where possible to promote consistency in the accounting treatment of crypto-assets. Additionally, the EBA sets out a number of steps that it will take in 2019 to enhance the monitoring of institutions' crypto-asset activities and consumer-facing disclosure practices. The EBA's executive director, Adam Farkas, said ‘the EBA's warnings to consumers and institutions on virtual currencies remain valid. The EBA calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto-assets. The EBA continues to monitor market developments from a prudential and consumer perspective.’ The report can be found here.