Europe has the potential to become a global leader in crypto-assets if it succeeds to create a common approach to regulating the sector.
So goes the argument in a new report from financial markets advocacy group, The Association for Financial Markets in Europe (AFME), in a new report published on Nov. 14.
Coordination remains the top priority
AFME’s new report sets out five recommendations for achieving supervisory convergence in regulating crypto assets across the bloc.
Chief among these is to establish a pan-European crypto-asset classification scheme, which can foster a common understanding of various terms and activities relating to crypto-assets in financial services.
On this point, AFME echoes the recent argument made by German banking association Bankenverband, which likewise stressed that a lack of clarity regarding crypto’s status as currency or asset is contributing to confusion over taxation and other regulatory matters.
AFME’s managing director and head of technology, James Kemp, has underscored that:
“There has been a rapid rise in the development of crypto-assets […] however, to realise those benefits, it is increasingly important that crypto-asset regulation is coordinated at the regional and global level to foster innovation, while promoting financial stability and ensuring a level playing field.”
Further key recommendations include defining “clear expectations” on crypto-asset issuance, implementing “activities-based and technology agnostic regulation” and using amended, existing regulation for the sector.
Above all, achieving the convergence of regulatory frameworks with global and regional initiatives should remain a top priority, according to AFME.
Combating regulatory arbitrage
Earlier this fall, Brussels-based think tank Bruegel called on EU finance ministers to enforce clear and uniform guidelines for crypto across European Union (EU) member states.
The think tank has argued that while new EU rules on money laundering will eventually tighten checks on market participants such as crypto exchanges by 2020, regulatory oversight is in practical terms largely left to national authorities.
This fact “might suggest that there is scope for regulatory arbitrage,” the think tank cautioned.