A member of the European Central Bank Supervisory Board has warned that the crypto rules in the EU’s Markets for Crypto Assets (MiCA) bill “won’t be enough on their own.” While he emphasized that “MiCA will put in place important safeguards to prevent incidents similar to the FTX case from happening,” he cautioned: “Certain areas still need further strengthening.”
ECB’s McCaul Warns of Inadequate EU Crypto Regulation
Elizabeth McCaul, a member of the Supervisory Board of the European Central Bank, spoke about the regulation of cryptocurrencies in a blog post published by the ECB on Wednesday.
He explained that the European Union’s proposed regulations for crypto assets are insufficient and need to 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’m afraid they won’t be enough on their own.
The ECB board member stressed that major crypto-asset service providers (CASPs) “should be subject to both more stringent requirements and enhanced oversight,” stressing that “MiCA does not cater for either.”
While noting that “MiCA will establish important safeguards to prevent incidents similar to the FTX case from occurring, such as strong governance principles such as segregation of client funds and requirements for external audits,” it cautioned:
Certain areas still need further strengthening.
McCaul raised concerns about how crypto asset service providers are sized. He noted that the crashed 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 28-29 million active users worldwide, but would probably not even meet the threshold to be classified as major in the EU.
The ECB board member also highlighted the need to develop new quantitative metrics for different types of businesses, such as trading volume for trading platforms or assets in custody for custodial businesses.
Noting that “MiCA applies only at the individual entity level,” he suggested that the thresholds be assessed at the group level rather than the individual entity level due to the complexity of operations. In addition, he said that conflicts of interest must be identified not only within the group but also between affiliated entities.
What do you think about the ECB board member who claims that the EU crypto rules are inadequate? Let us know in the comments section.
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