ECB Board Member Warns New EU Crypto Rules Are Not Enough

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A member of the European Central Bank’s Supervisory Board has warned that the crypto rules in the draft EU Crypto-Asset Markets Act (MiCA) “will not be enough on their own.” While stressing that “the MiCA will put in place important safeguards to prevent incidents similar to the FTX case from occurring”, she warned: “Some areas still need to be strengthened”.

ECB McCaul Warns of Inadequate EU Crypto Regulation

European Central Bank Supervisory Board member Elizabeth McCaul discussed cryptocurrency regulation in a blog post published by the ECB on Wednesday.

She explained that the regulation proposed by the European Union for crypto assets is insufficient and needs to be strengthened to deal effectively with crypto risks. The European Parliament is expected to vote on the Crypto-Asset Markets Bill (MiCA) later this month. McCaul said:

Although the new Basel standard and the MiCA are important steps, I am afraid they are not enough on their own.

The ECB board member pointed out that major crypto-asset service providers (CASPs) “should be subject to both stricter requirements and enhanced oversight”, pointing out that “none of the two is only supported by the MiCA”.

While noting that the MiCA will establish important safeguards to prevent incidents similar to the FTX case from occurring, such as strong governance principles like segregation of client funds and requirements for external audits, it warned :

Some areas still need to be strengthened.

McCaul raised concerns about how the size of crypto-asset service providers is measured. She pointed out that collapsed crypto exchange FTX “would not have been classified as a significant CASP under MiCA because it did not meet the 15 million active user threshold. She continued:

In fact, Binance, which is the biggest crypto player, is said to have between 28 and 29 million active users globally, but probably wouldn’t even meet the threshold to be classified as important in the EU.

The ECB Executive Board member also highlighted the need to develop new quantitative metrics for different types of businesses, such as trading volume for trading venues or assets under custody for custodian businesses.

Noting that MiCA only applies at the individual entity level, she suggested that the thresholds be assessed at the group level rather than the individual entity level due to the complexity of operations. Furthermore, she stated that conflicts of interest must be identified not only within the group but also between affiliated entities.

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Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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