The European Union posits that ICOs and crypto assets present substantial risks. Hence the European Securities and Markets Authority (ESMA) is looking to establish an EU-wide regulation.
The EU has long been preoccupied with crypto and blockchain. However, now it is taking more concrete measures. Together with national agencies, ESMA has published advice for the European lawmakers that assesses the existing gaps in the EU regulatory framework.
ESMA believes that these gaps prevent the effective control of new and existing crypto assets. The authority noted that some crypto assets already qualify as financial instruments under the MIFID directive. However, in order to work regulation requires “re-consideration of specific requirements”. Specifically, ESMA’s chair Steven Maijoor noted that:
“In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.”
However, it also acknowledges that there are assets that do not qualify as financial instruments. Thus they are highly-risky for investors. The current law does not protect them.
“Because the existing rules were not designed with these instruments in mind, NCAs face challenges in interpreting the existing requirements and certain requirements are not adapted to the specific characteristics of crypto assets.”
Lorraine Johnston, regulatory counsel at law firm Ashurst, believes that a pan-European approach makes sense. However, she also emphasizes that “the difficulty will be getting a model which fits all interests, including making the EU an attractive forum for issuers and traders. Still, she salutes the measure saying that it “is a positive step in the right direction.”
ESMA promised that it will continue to meticulously study the crypto market.
Open to innovation
The EU has been exhibiting a careful approach to cryptocurrencies. Back in July, the Policy Department for Economic, Scientific and Quality of Life Policies published a report entitled “Virtual currencies and central banks monetary policy: challenges ahead.” Its authors advised not to ban crypto. Instead, they recommended introducing adequate regulation. Likewise, Bruegel, a Brussels-based think-tank, also urged European authorities to adopt EU-wide crypto regulation.
While the EU’s attitude to crypto is still largely careful, the same does not hold true for blockchain. The Union is enthusiastically embracing the technology at all levels. The European Commissioner for Digital Economy and Society, Mariya Gabriel, stated that blockchain is a great opportunity for Europe and member states to re-think their information systems. Besides, last year the EU held an Ask Me Anything session on the blockchain usage.
Yet the European Union barely survived the Eurozone crisis! They won’t make it to 2030.