Cryptocurrency regulation is still a confusing issue at the moment. While some countries encourage crypto-related activities by enacting industry-friendly regulations, there are others that are a bit too stringent in their approach due to fears that unforeseen crypto industry problems – such as ICO scams or major market crashes – might spill over to the entire financial system.
Crypto Activity Won’t Threaten Europe’s Financial Stability
But according to the European Banking Authority (EBA), crypto-industry related issues won’t have a major impact on Europe’s financial system at all, at least not at the moment.
In a report released Wednesday, EBA says current crypto asset activity in the continent is so small that any problem in the industry won’t affect its financial stability.
In the report’s executive summary, EBA wrote:
“Crypto-asset-related activity in the EU is regarded to be relatively limited and, at this time, such activity does not appear to give rise to implications for financial stability.”
But EU-level Rules Still Necessary
Aside from noting the relatively small scale of crypto asset activity, however, EBA also noted that crypto-assets are not usually covered by existing EU financial services regulation. And, in cases that they are covered under national laws, these regulations are not consistent across the Union, according to Forbes.
As a result, EBA warns that these divergent approaches to the regulation of crypto assets might create potential problems for the industry in the future.
The regulatory authority wrote:
“These factors give rise to potential issues, including regarding consumer protection, operational resilience, market integrity, and the level playing field… At the EU level, it is important to provide clarity about the applicability of current EU financial services law to crypto-assets/activities to ensure that there is a common understanding of the extent to which current legislation addresses the risks and supports the opportunities relating to crypto-assets and DLT.”
According to EBA, one important issue it wants to address is the lack of reporting requirements for crypto-assets activities at the financial institutions level.
It plans to provide a monitoring template this year to address this issue. In addition, the regulatory agency plans to implement an assessment system to evaluate crypto-asset advertising.