According to Elizabeth McCaul, a member of the supervisory board of the European Central Bank, the European Union’s planned laws for crypto assets do not go far enough and protections must be tightened to effectively capture risks.
After a slew of scandals and collapses, the European Parliament will vote on the Markets in Crypto-assets (MiCA) bill later this month, marking a significant step towards establishing supervision of the cryptocurrency industry.
While the new Basel standard and MiCA are significant steps, McCaul wrote in a blog post that “I am afraid they will not be sufficient on their own.”
She claimed that, “in accordance with the principle of proportionality, significant crypto-asset service providers should be subject to both stricter requirements and enhanced supervision: neither of the two is catered for by MiCA.”
Another concern is the methodology used to determine the scale of crypto-asset service providers because, given the way the company was set up, the now-defunct crypto exchange FTX would not have been considered to be substantial.
Although the largest cryptocurrency player, Binance, is reported to have between 28 million and 29 million active users globally, it would likely fall short of the need to be deemed substantial in the EU, according to McCaul.
Despite the fact that the crypto world has experienced high-profile failures, bankruptcies, and fraud over the past year, many assets have seen increases in value recently as a result of people shifting away from bank accounts due to concerns about the soundness of the banking sector.
According to McCaul, there is a need for new quantitative indicators that can account for the nature of the business, such as volume for trading platforms or assets under custody for custody-based companies.
Given the complexity of activities, she claimed that thresholds needed to be measured at the group level as opposed to the level of each individual entity. Conflicts of interest must also be detected both within the group and at related entities, according to McCaul.
