EU crypto framework under scrutiny by policymakers after FTX collapse


EU policymakers have solid doubt on whether or not the bloc’s incoming cryptocurrency rules are sturdy sufficient to stop a repeat of the collapse of FTX, whose chapter has despatched shockwaves by way of the digital belongings business.

During a listening to held by the European parliament’s financial and financial affairs committee on Wednesday, MEPs questioned if the EU’s landmark crypto framework Markets in Crypto-Assets (Mica), which comes into power in 2024, may cease an FTX-equivalent collapse.

“I have serious doubts that Mica would have prevented what happened . . . many of the problems are well beyond the scope of [the legislation],” mentioned Spanish MEP Ernest Urtasun. Aurore Lalucq, a French MEP who has beforehand criticised a few of Europe’s strategy to digital belongings, mentioned she would really like Europe’s lawmakers to “wake up”.

The listening to was referred to as in response to the chapter in November of FTX, which has rocked an business already reeling from this summer time’s market crash. The collapse of FTX, which was primarily based in The Bahamas, has prompted criticism of regulators within the island nation. The fallout of the once-marquee crypto buying and selling home has additionally precipitated spillover into Cyprus.

FTX’s European footprint left by the Cypriot subsidiary, which has now had its license suspended, has angered lawmakers who concern that nationwide authorities is probably not as much as the duty of regulating the troubled business. 

Markus Ferber, a German MEP, mentioned it was “concerning that FTX managed to obtain an investment firm license in Cyprus. If [this subsidiary] even remotely behaved like its parent company, this raises major questions in relation to the quality of financial services supervision in Cyprus”.

Mica has been seen as a watershed second for crypto regulation, because it represents an effort to impose EU-wide requirements, fairly than having competing nationwide approaches.

Under the laws, crypto corporations would have to be authorised by one EU member state regulator, permitting the corporate to passport its companies throughout the bloc. National regulators would in flip share info with the European Securities and Markets Authority. 

The listening to comes as European Central Bank officers mentioned bitcoin was unsuitable as each a cost technique and an funding car, in an unusually forceful rejection of the digital currency.

The current stabilisation of bitcoin’s worth at “around $20,000” — down from its 2021 peak of round $69,000 — was an “artificially induced last gasp before the road to irrelevance”, Ulrich Bindseil and Jürgen Schaaf wrote in an ECB blog post on Wednesday, rejecting claims that the digital currency would rebound.

The central bankers argued that bitcoin was “questionable” as a method of cost due to its “conceptual design and technological shortcomings” that rendered its transactions “cumbersome, slow and expensive”. They urged regulators to not give the digital currency legitimacy within the identify of innovation.

“Bitcoin has never been used to any significant extent for legal real-world transactions,” they wrote. Bindseil and Schaaf additionally mentioned that the cryptocurrency was “not suitable as an investment”, including that its market valuation was “based purely on speculation”.

“It does not generate cash flow (like real estate) or dividends (like equities), cannot be used productively (like commodities) or provide social benefits (like gold),” they wrote.

The publish additionally hit out at regulators, saying that present frameworks had been formed by misconceptions, together with the idea that innovation needs to be fostered in any respect prices.

“Since bitcoin appears to be neither suitable as a payment system nor as a form of investment, it should be treated as neither in regulatory terms and thus should not be legitimised,” they mentioned.

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