Verena Ross, the Chair of the European Securities and Markets Authority (ESMA), has called for the urgent regulation of the crypto space.
In an interview on May 25, Ross said she is eagerly waiting for lawmakers to pass the EU’s blueprint for crypto regulation into law. According to her, the rising inflation will force retail investors to inject funds into risky cryptos while trying to find investments to compensate for inflation and bring greater returns; this might lead to greater risk-taking.
Currently, national regulators within the EU handle the crypto industry based on local laws. As a result, each country has a different approach to regulating the nascent asset class.
Emphasizing the need for a common regulatory framework in the EU, Ross focused on crypto exchanges, saying,
“There is no EU regulatory framework for these kinds of entities at the moment and so there is currently an imbalance in how national supervisors deal with these entities and how they judge them. That’s where a common regulatory framework will help.”
MiCA draft is still under consideration despite repeated calls for regulation
The EU is pinning its hopes of standardizing crypto regulation on the Markets in Crypto-Assets Regulation (MiCA), a draft framework proposed in September 2020. MiCA’s road to implementation has been long. The draft is currently under examination by the European Parliament and Council.
Despite this progress, Ross said she hopes the European Parliament and Council finalize the review process in the next few months and pass MiCA into law in either 2023 or 2024.
Apart from Ross, the President of the European Central Bank, Christine Lagarde, also called for crypto regulation. Earlier this week, she said crypto is worth nothing. Francois Villeroy de Galhau, Governing Council member, further bashed the crypto space, expressing its promises and rewards are an illusion.
Additionally, the ECB voiced concerns about the full-scale connection between the crypto industry and the traditional finance sector. In a Financial Stability Review, the regulator highlighted how crypto investors withstood a €1.3 trillion ($1.39 trillion) market loss without facing financial stability risks.
ECB added that the crypto market is gravitating to a point where unbacked crypto assets will risk financial stability.
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