A European Central Bank Supervisory Board member has warned that the crypto rules in the EU’s Markets in Crypto-Assets (MiCA) bill “will not be sufficient on their own.” While emphasizing that “MiCA will set out important safeguards to prevent incidents similar to the FTX case from occurring,” she cautioned: “Certain areas still need further strengthening.”
ECB’s McCaul Warns of EU’s Inadequate Crypto Regulation
Elizabeth McCaul, a member of the European Central Bank Supervisory Board, discussed cryptocurrency regulation in a blog post published by the ECB Wednesday.
She explained that the regulations proposed by the European Union for crypto assets are insufficient and must be strengthened to effectively address crypto risks. The European Parliament is set to vote on the Markets in Crypto-Assets (MiCA) bill later this month. McCaul opined:
While the new Basel standard and MiCA are important milestones, I am afraid they will not be sufficient on their own.
The ECB board member stressed that significant crypto asset service providers (CASPs) “should be subject to both stricter requirements and enhanced supervision,” emphasizing that “neither of the two is catered for by MiCA.”
While noting that “MiCA will set out important safeguards to prevent incidents similar to the FTX case from occurring, like strong governance principles like the segregation of customer funds and requirements for external audits,” she warned:
Certain areas still need further strengthening.
McCaul raised concerns about how the size of crypto-asset service providers is measured. She pointed out that the collapsed crypto exchange FTX “would not have been classified as a significant CASP under MiCA because it did not reach the threshold of 15 million active users.” She continued:
In fact, Binance, which is the largest crypto player, is alleged to have between 28 million and 29 million active users worldwide, but would probably not even meet the threshold to be classified as significant in the EU.
The ECB board member also highlighted the necessity of developing new quantitative metrics for different types of businesses, such as trading volume for trading platforms or assets under custody for custodian businesses.
Noting that “MiCA applies only at the individual entity level,” she suggested that thresholds be evaluated at the group level rather than the individual entity level due to the complexity of operations. Additionally, she said conflicts of interest must be identified not only within the group but also among affiliated entities.
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