- EU might include cryptocurrencies in the scope of the existing regulations.
- The authorities are preoccupied with consumer protection and money laundering issues.
Certain cryptocurrencies may be classified as financial instruments under the existing financial regulation of the European Union, according to the representatives of the European Securities and Markets Authority (ESMA). Namely, the assets created in the course of initial coin offerings (ICOs) with the aim to raise financing will fall under this category.
According to the report submitted to the Commission of the European Banking Authority, it is highly desirable to develop pan-European rules and regulations for digital assets as patchy regulation can be easily exploited by bad actors and deprive consumers of the necessary protection.
“Typically crypto-assets fall outside the scope of EU financial services regulation. Moreover, divergent approaches to the regulation of these activities are emerging across the EU. These factors give rise to potential issues, including regarding consumer protection, operational resilience, and the level playing field,” the report says.
Apart from that, EBA focuses on money laundering issues, as criminals can exploit the ecosystem vulnerabilities to bypass the existing rules while dealing with cryptocurrencies, including Bitcoin, Ethereum and XRP among others.
Also, EBA urges the European Commission to follow the recommendations of the Financial Action Taskforce (FATF) to stop virtual assets from being used for money laundering purposes.
Meanwhile, Bitcoin resumed the downside trend and crashed well below $4,000 handle on Thursday. BTC/USD is changing hands at $3,619 at the time of writing, down over 9% on a daily basis. A sell-off in 2018 took Bitcoin from its all-time high close to $20,000 to as low as $3,127 on December 2018. The downside was partially driven by concerns of regulatory scrutiny.