Last Wednesday, the banking watchdog of the European Union said that new rules may be necessary to stop the existing regulation on digital assets and cryptocurrencies from getting too diverse across the European Union.
Cryptoassets such as ether, bitcoin, and tokens that are created in initial coin offerings (ICOs) usually fall outside of the scope of the financial legislation of the European Union, which makes it harder to keep track of the ever-changing sector landscape.
The comments of the European Banking Authority come amidst the findings of its year-long investigation into crypto assets. It added that as a result, a divergence in the regulation across the different countries means that pan-European regulation may be necessary to “level the playing field.”
The EBA report noted how some countries such as the United Kingdom are exploring to impose a ban on crypto derivative products, such as exchange-traded funds that speculate on the prices of cryptocurrencies that are going up or down, to protect the less-educated investors. The asset class is already banned in Germany.
The EBA said that the fact that the laws regarding cryptoassets are not uniformly applied across the European Union implies that various companies will flock to so-called regulatory havens, such as Gibraltar and Malta, where blockchain and crypto businesses face less stringent compliance. It alleges that this would create an unfair competitive environment.
Adam Farkas, the executive director of the watchdog, said that the EBA “calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto assets.”
The report said that the Commission must carry out a comprehensive cost-benefit analysis to determine what, if any, action should be taken in order to regulate the “opportunities and risks” that cryptoassets may pose.
As such, Farkas said that the EBA will “continue to monitor market developments from a prudential and consumer perspective.”