Europe’s banking watchdog has raised the possibility of pan-European regulation of crypto assets and tokens, saying it may be needed to “level the playing field.”
The European Banking Authority (EBA), the EU’s pan-European banking regulator, published the results of its year-long investigation into crypto assets such as bitcoin and ICO tokens on Wednesday.
The report found that “a significant portion of activities involving crypto-assets do not fall within the scope of current EU financial services law (but may fall within the scope of national laws).” As a result, there is the possibility of regulatory divergence between members of the EU.
The report noted that Germany has banned crypto derivative products, while the UK is looking at a similar prohibition. The fact that this is not uniform across the EU could give rise to regulatory arbitrage, where firms chose to set up in more loosely regulated parts of the EU, but are still able to sell to EU customers under passporting rules.
Pan-European laws may therefore be needed for “consumer protection, operational resilience, and market integrity,” according to the EBA.
The regulator called on the European Commission to carry out a cost-benefit analysis to see if action was needed to regulate crypto across the EU.
Adam Farkas, the EBA’s Executive Director, said in a statement: “The EBA calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto-assets. The EBA continues to monitor market developments from a prudential and consumer perspective.”
The EBA noted that that there is currently “a relatively low level of crypto-asset activity” across EU-based financial institutions and said crypto “does not appear to give rise to implications for financial stability.”
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.