The European Securities and Markets Authority (ESMA) has called for a pan-European response to regulating cryptocurrencies and other digital assets in an internal report published on behalf of EU institutions.
In a document designed to inform policymakers, ESMA suggested that current regulatory gaps should be addressed by the EU Commission, the body which instigates and creates regulations and directives for the bloc.
In particular, ESMA identified a number of ‘concerns’ arising from the current regulatory position, which catches some but not all crypto-assets under existing laws.
ESMA chair Steven Maijoor said that while some instruments may fall under the MiFID rules, a dedicated regulatory framework would help reduce the risks to investors from unregulated firms.
He noted, “Our survey of NCAs highlighted that some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply. However, 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.”
“Meanwhile, a number of crypto-assets fall outside the current financial regulatory framework. This poses substantial risks to investors who have limited or no protection when investing in those crypto-assets. 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,” according to Maijoor.
The advice is designed to get EU institutions up to speed on the current legal position, and where there is scope for developing new laws to protect investors and clean up the crypto sector across the region.
In the report, ESMA said it will continue to keep a close eye on market developments, working with other partners including the National Competent Authorities of member states, to advise on policy going forward.
It comes at a time of increasing scrutiny for cryptocurrency from regulators worldwide, amidst a global push to tackle remaining grey areas and loopholes, for the benefit of investors.
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