European countries like Malta and Belarus have released a regulatory framework for cryptocurrencies, but some regions are still undecided on how to manage the burgeoning industry.
To come to the aid of these EU member countries, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) issued separate reports this week, urging the European Commission to provide rules for cryptospace.
The EBA published its report about virtual currencies on Tuesday, Jan 8 and acknowledged in one of its section that existing EU Financial laws do not cover crypto-asset related activities despite the high risks they pose to investors.
To solve the current situation, the EBA’s Executive Director, Adam Farkas proposed in a statement that the European Commission to “assess whether regulatory action is needed to achieve a common EU approach to crypto-assets.”
Additionally, the EBA recommended that the EU could borrow a leaf on how to regulate the industry from directives scheduled to be released in June by the Financial Action Task Force (FATF). In an earlier report, we revealed that the G20 member countries are also looking to align their cryptocurrency regulations with FATF standards.
Like the EBA, the European Securities and Markets Authority (ESMA) released a report on Wednesday, January 9 and called on the EU Commission and Parliament to bring ICOs and crypto-asset transactions under a regulatory framework.
Notably, just as the U.K Financial Conduct Authority could fit some cryptocurrencies within existing securities law, ESMA advised the EU Commission to consider applying the same approach.
Steven Maijoor, ESMA's Chairman, wrote in the report that “some crypto-assets may qualify as MiFID financial instruments, in which case the full set of EU financial rules would apply.”
However, he also admitted that the Commission could face some challenges with some crypto-assets that do not fit into the same category as traditional financial instruments. In the end, ESMA suggested that the EU would have to find a way to regulate crypto-assets since investor protection is at stake.
At this point, only time would tell whether the EU Commission will heed to these calls to regulate the cryptocurrency industry. Doing so would make Europe the first world region to do so and possibly bring more legitimacy to cryptospace.