The European Banking Authority (EBA) is to review the regulation of cryptocurrencies in the region, after hearing fresh concerns about digital assets’ vulnerability to money laundering and terrorist financing.
Virtual currencies like bitcoin have been attracting increased scrutiny in recent months amid wild price swings.
In February, the EBA, European Securities and Markets Authority and European Insurance and Occupational Pensions Authority issued a joint warning to consumers on the risks of investing in digital money.
The EBA followed this warning on Thursday with a Fintech Roadmap in which it outlined priorities for oversight of the financial technology sector over the next two years. It comes a week after an EU action plan for making the bloc a global hub for fintech.
In a question and answer accompanying the roadmap, the EBA said it plans to work with other watchdogs to assess whether the current framework for regulating the crypto market is “appropriate”, before submitting a report to EU legislators with its findings.
The roadmap draws on responses to a discussion paper the EBA published last August on its approach to regulating new financial technologies. Cryptocurrencies, such as bitcoin, were commonly cited by respondents as being vulnerable to money laundering and terrorist financing.
Other fintech solutions thought to be at increased risk of these activities included peer-to-peer lending, initial coin offerings and cross-border payments.
The EBA said, “Respondents thought this was due to a lax regulatory and supervisory environment and institutions’ lack of CDD [customer due diligence]/know your customer (‘KYC’) capability. Respondents also mentioned anonymity, the speed of transactions and the involvement of intermediaries as risk-increasing factors.”
Alongside its roadmap, the EBA has set up a hub for regulators in the region to discuss and share knowledge about financial technology. The idea of the hub is to bring together EU supervisors to enhance oversight of innovation, make sure they have similar approaches to regulation across the bloc and engage with existing and new fintech providers.
Andrea Enria, chair of the EBA, said that this would “help facilitate innovation and scalability across the single market”.
The regulator’s priorities outlined in the roadmap include assessing the approach to authorising and licensing fintech firms.
Frontpage October 21, 2019
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