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ECB Starting to Enforce Due-Diligence Criteria on Crypto

By Steve Murphy
August 18, 2022
in Analysts Coverage, Cryptocurrency, Digital Assets & Crypto
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Swapin Aims to Ease Crypto-to-Fiat Transfers

Swapin Aims to Ease Crypto-to-Fiat Transfers

This posting at CoinTelegraph summarizes the current stance by the ECB (European Central Bank) on digital assets. As many readers will already know, the Euro Zone has active regulators and many of them, since each country needs to ratify whatever is proposed by the EC.  In this case we are talking about the licensing process for companies that want to deal in Cryptos. The regulation referenced is the MiCA (Markets in Crypto Assets), which applies to any cryptocurrency-associated company or individual that wants to offer their coins, assets or services in Europe. The scope involves several categories of agents, including custodians and administrative services in the cryptocurrency industry. Moreover, all trading platforms, exchanges (whether fiat to crypto or crypto to crypto), and asset issuers are subjected to the MiCA. The ECB would be one entity reviewing these companies as part of their core responsibilities for licensing review, at least as far as we understand it.

‘In a Wednesday statement, the ECB’s banking supervision division said it would be taking steps to regulate digital assets as “national frameworks governing crypto-assets diverge quite extensively” and given the seemingly differing approaches to harmonization following the passage of the Markets in Crypto-Assets (MiCA) regulation and the Basel Committee on Banking Supervision issuing guidelines for banks’ exposure to crypto. The ECB said it would apply criteria from the Capital Requirements Directive — in effect since 2013 — to assess licensing requests for crypto-related activities and services.’

While we are not familiar with all the details of MiCA, the ECB is simply pointing out some of the due diligence criteria that will be applied when license reviews are underway.  Cryptos are still relatively new and this particular legislation does not get fully rolled out until 2024 anyway.  The piece also points out that the ECB recently released a study whereby a CBDC is preferred over decentralized cryptos or even stable coins as a means for x-border payments. We recently covered B2B uses for cryptos in a member research paper. Those interested should give it a quick read and dig into more detail.

“The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of crypto should be,” the ECB said. “Senior managers or board members with relevant IT knowledge and chief risk officers with robust experience in this area are important safeguards.”….According to the ECB, there is “work ongoing” to analyze the role crypto may play in Europe, which will “remain an area of focus for European banking supervision in years to come.” With the passage of MiCA, global regulators may begin to standardize rules for crypto service providers within the European Union.

Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group.

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Tags: CBDCcryptoDigital AssetsECB

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