ECB Board Member Warns EU's New Crypto Rules Not Sufficient

The crypto regulations included in the EU's Markets in Crypto-Assets (MiCA) bill "will not be sufficient on their own," according to a member of the European Central Bank Supervisory Board. She warned, pointing out that "MiCA will set out important safeguards to prevent incidents similar to the FTX case from occurring." There are still areas that require more work.

Elizabeth McCaul, an individual from the European National Bank Administrative Board, examined digital money guideline in a blog entry distributed by the ECB Wednesday.

She explained that, in order to effectively address crypto risks, the European Union's proposed regulations for crypto assets are inadequate and must be strengthened. The Markets in Crypto-Assets (MiCA) bill will be up for a vote in the European Parliament later this month. McCaul believed:

Despite the fact that the new Basel standard and MiCA are significant milestones, I worry that they will not suffice on their own.

The member of the ECB board emphasized that major crypto asset service providers (CASPs) "should be subject to both stricter requirements and enhanced supervision" and that "neither of the two is catered for by MiCA."

She admonished, noting that "MiCA will set out important safeguards to prevent incidents similar to the FTX case from occurring, such as strong governance principles like the segregation of customer funds and requirements for external audits," but also pointing out the following:

There is still room for improvement in some areas.

McCaul raised worries about how the size of crypto-resource specialist co-ops is estimated. She mentioned that the defunct cryptocurrency exchange FTX "would not have been classified as a significant CASP under MiCA because it did not reach the threshold of 15 million active users." This was the reason why the exchange failed. She went on:

In point of fact, Binance, the largest crypto player, is said to have anywhere from 28 million to 29 million active users all over the world. However, this number probably does not even come close to being sufficient for the company to be considered significant in the EU.

Additionally, the member of the ECB board emphasized the need to develop new quantitative metrics for various business types, such as trading volume for trading platforms or assets under custody for custodian businesses.

She suggested that thresholds be evaluated at the group level rather than the individual entity level due to the complexity of operations, noting that "MiCA applies only at the individual entity level." Moreover, she expressed irreconcilable circumstances should be recognized inside the gathering as well as among subsidiary elements.

What do you think about the ECB board member stating that the EU’s crypto rules are inadequate? Let me know in the comments section below.

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