Don’t Regulate Crypto, Regulate Financial Institutions, Says EU Banking Authority Chair
The chairperson of the European Banking Authority has said it may be a better idea to keep financial institutions from holding and selling crypto, as opposed to regulating crypto itself.
Andrea Enria, the chairperson of the European Banking Authority (EBA), said that it could be more efficient to prohibit banks and other financial institutions from holding and selling cryptocurrencies, than to directly regulate crypto, the Financial Times (FT) reported Friday, March 9.
Enria’s remarks follow the recent movement toward cryptocurrency regulation in Europe. Yesterday, March 8, the European Commission released its “Action Plan” designed to develop an EU-wide regulatory framework for fintech, including Blockchain. Last week, the Governor of the Bank of England commented that crypto should be regulated and not “banned outright.”
During a speech Friday in Copenhagen, Enria mentioned that he was not convinced that the lack of institutions backing cryptocurrencies is evidence that cryptocurrencies themselves should be regulated. He added that the EBA had come up with the idea for limiting regulated companies’ contact with crypto in 2014, FT reports.
Enria supports withholding the full force of regulatory measures from fintech firms, so long as they do not perform the same functions of banks, providing credit, debit, and liquidity.
“An excessive extension of the regulatory perimeter [...] [for fintech firms] is likely to be a sub-optimal solution. It would risk excessively constraining financial innovation, as the compliance burden placed on banks is not sustainable for small innovative start-ups.”
However, Enria added that EU regulators should not permit “de facto banks” to offer a combination of “deposit-taking and lending” without rigorous regulatory supervision.
Enria noted that fintech regulation must take place across the European Union in order to keep EU firms competitive with the US and China.
In mid-February 2018, the European Supervisory Authorities, made up of the EBA, the European Securities and Markets Authority (ESMA), and the European Insurance and Occupational Pensions Authority (EIOPA), released a warning that cryptocurrencies were risky assets from which investors need to be protected.