EU supervisors call for EU-wide policy response to crypto-assets

By Giovanni Campi and Martina Topercerova

The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) published two complementary assessments of the regulatory coverage of crypto-assets under existing EU legislation and also set out their advice to the European Commission on potential policy initiatives in the future.

ESMA’s report looks at the Member States’ interpretation of crypto-assets, namely whether they qualify as financial instruments under the Markets in Financial Instruments Directive (MiFID II).The EBA assessed the relevance of the “electronic money” definition under the Electronic Money Directive (EMD2) as well as of“funds” under the Payment Services Directive (PSD2).

ESMA found that the majority of national supervisors have defined at least some types of crypto-assets as transferable securities or other types of MiFID financial instruments. The EBA noted that a significant portion of crypto-assets is not covered by the EU banking, payments and electronic money law. Notable differences among the EU Member States’ transposition of MiFID II and gaps in the general legislative coverage of crypto-asses and related activities leave consumers exposed to risks. Both authorities further warn that differing regulatory approaches on crypto-assets at the national level, might not only undermine the level playing field across the EU, but also pose challenges to the adoption of any EU-wide response.

The EBA advises the European Commission to carry out a cost/benefit analysis to consider the appropriateness and feasibility of EU action. ESMA calls for a bespoke regime for crypto-assets which do not qualify as financial instruments. Both authorities recommend prioritising the application of anti-money laundering rules to all activities involving crypto-assets. Among the possible first steps, ESMA proposes to increase transparency through appropriate risk disclosure requirements, while the EBA highlights the need to ensure consistency in the accounting treatment.