New rules may be needed to stop existing regulation on cryptocurrencies and digital assets from getting too diverse across the European Union, the bloc's banking watchdog said yesterday.
Cryptoassets such as bitcoin, ether and tokens created in initial coin offerings (ICOs) typically fall outside of the scope of EU financial legislation, which makes it hard to keep track of the ever-changing sector landscape.
As a result, divergence in regulation across the different countries means pan-European regulation may be needed to "level the playing field", the European Banking Authority said in the findings of its year-long investigation into cryptoassets.
The report noted how some countries such as the UK are exploring a ban on crypto derivative products, such as exchange traded funds that speculate on the prices of cryptocurrencies going up or down, to protect less-educated investors. The asset class is already prohibited in Germany.
The EBA said the fact that laws regarding cryptoassets are not applied uniformly across the bloc means firms will flock to so-called regulatory havens, such as Malta and Gibraltar, where crypto and blockchain businesses face less stringent compliance. This would, it alleges, create an unfair competitive environment.
The watchdog's executive director Adam Farkas said the EBA "calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to cryptoassets".
The report recommended the Commission carry out a comprehensive cost-benefit analysis to determine what, if any, action should be taken to regulate the "opportunities and risks" cryptoassets may pose.
As such, he said the EBA will "continue to monitor market developments from a prudential and consumer perspective".