LONDON (Reuters) – the New rules of the European Union may be needed to better protect consumers of cryptoasset risks, the prevention of money laundering and stop with the different national regulations, creating unfair competition, the EU regulators said on Wednesday.
FILE PHOTO: Explanations of the Ripple, Bitcoin, Etherum and Litecoin virtual currencies are to be seen on a PC motherboard in this illustration, image, February 13, 2018. Photo was taken on February 13, 2018. REUTERS/dado Ruvic/Illustration
Regulators have warned that investors since 2013, they could lose their shirts by investing in virtual currencies such as Bitcoin and ether, or in the first currency of the offer (ICOs) to raise money for businesses in exchange for tokens.
Bitcoin rose in the neighborhood of $20,000 in late 2017, the sweeping of investors from all over the world, but it has since lost three quarters of its value.
The value of cryptoassets worldwide peaked at $830 billion a year ago, but decreased to $210 billion in October, equivalent to less than 3 percent of the gold market.
The European Banking Authority (EBA) said in a report on cryptoassets that they usually fall outside the scope of the EU financial rules, making it harder to build up a detailed picture.
EU regulators have identified financial institutions possess cryptoassets directly, creating a market in them, loans against cryptoasset collateral, and the exchange of cryptoassets for money, but have little data about these activities.
The developments in the market also point to the need for a further revision of the EU anti-money laundering legislation, the EBA said.
A comprehensive cost-benefit analysis would determine whether any action is required to control “risks and opportunities” of cryptoasset activities and related technologies, the EBA said.
The watchdog said a comprehensive approach should be taken, including how high the amounts of the energy that is used to mint cryptoassets impact of the european union on climate change and sustainable development objectives.
An EU analysis could assess the impact of cryptoasset activities of the financial sector resilience, and the links between cryptoassets and traditional banking.
“Given the pace and complexity of change, it would be desirable to have a technology-neutral and future-proof approach that should be followed when developing proposals, it must be concluded that the measures at the EU level,” the EBA said.
Separately, the European Securities and Markets Authority (ESMA) said cryptoassets are covered by the EU-securities’ trading rules, but that regulators face challenges in the implementation.
“Meanwhile, a number of crypto-assets fall outside the current financial regulations. This brings significant risk to investors who have little or no protection when investing in these crypto-assets”, said Steven Maijoor, the ESMA chair.
There is no legal definition of cryptoassets, and holes in the rules would be best addressed at the European level, he added.
The EBA and ESMA recommendations mark a step closer to regulating the sector in Europe after trying to find the global consensus on the rules, however, have not so far to go beyond the monitoring of the industry in the foot.
But finding consensus within the EU is not easy.
While most of the national regulators in the EU agree that cryptoassets should be subject to regulation by the ESMA said, there is little consensus on the question of whether the new rules should fall within the block of the main “MiFID” securities law.
“There were also disagreements over the scope of the regulatory regime,” ESMA said.
ESMA said that it would be the development of a common monitoring template” that the national regulatory authorities may require companies to complete the data better. It will also include the study of each business model where cryptoassets to see if they must comply with all EU rules.
Regulators already have a range of “robust supervisory powers” to mitigate risks, the EBA said. They should take a conservative approach in forcing financial firms to hold capital to cover risks until there is a clear accounting rules to help the value cryptoassets, added.
Although the crash in cryptocurrencies’ value from a number of investors, the French “Tabac” shops are now selling bitcoins in addition to cigarettes and lottery tickets.
Reporting by Huw Jones; Editing by Andrew Cawthorne and Gareth Jones