The European Economic and Social Committee backs increased regulation of crypto-assets, with robust, coherent rules to better protect investors across the EU in line with current measures applied to traditional financial services.
Crypto-assets are a digital representation of value that can be transferred, stored or traded electronically. They are neither issued nor guaranteed by a central bank or public authority. Many types of such assets exist, representing various challenges and opportunities for investors, regulators and the financial sector.
In an own-initiative opinion in which it analyses the challenges and opportunities of crypto assets, the EESC reiterates its backing of the European Commission’s proposal for a strong, streamlined markets in crypto-assets (MiCA) regulation.
The MiCA aims to protect investors and preserve financial stability, while allowing innovation and fostering the attractiveness of the sector. The proposal provides for a mandatory license for crypto-asset service providers (CASPs) and aims to address a lack of harmonisation among EU countries.
A regulatory framework for crypto-assets needs to be consistent across jurisdictions and not just within the EU. Standards based on a level playing field should be set within and outside the EU to protect customers, said EESC rapporteur Philip Von Brockdorff.
Certain issues have not yet been addressed by MiCA, and the EESC therefore calls for the Commission to improve the tracking of transactions and ensure those using or investing in crypto-assets comply with tax laws.
Crypto-assets represent a number of social, political and economic challenges. They are often used as means of payment for criminal activities, for example for cyber-crimes. The European Central Bank (ECB) also noted that crypto-assets are being used to evade sanctions imposed on Russian oligarchs as a result of the war in Ukraine.
Some EU countries have already put in place national rules, leading to regulatory fragmentation within the EU. EESC co-rapporteur Louise Grabo told during the September plenary:
We welcome the MiCA regulations that will regulate CASPs, but we also see that crypto are a global phenomenon. We need global collaboration and guidelines to understand the challenges that we meet, to secure consumer protection, ensure financial stability and prevent fraud and money laundering within the crypto system.
Misleading information and a lack of transparency is another concern. Some crypto-assets are aggressively advertised using unclear, inaccurate or deliberately misleading material, putting at risk in particular small investors and consumers that use crypto assets for payments or for investment. The environmental footprint of certain crypto-assets are also a big issue.
Benefits that should be reaped
Especially for international money transfers, crypto assets provide for much lower transaction costs than traditional financial service providers. Also, the EESC believes that blockchain, as the main underlying technology for crypto-assets, could help address certain existing risks. Technological developments may help address tax compliance limitations, thus improving transparency and reducing tax fraud and illicit transactions. Such developments could also motivate banks to cooperate within the blockchain ecosystem, allowing them to share information via a blockchain-based trade finance platform, the EESC believes.
The EESC also supports a strong role for the ECB in monitoring the crypto-assets market, the impact on monetary policy and further risks posed by this class of financial assets, for example on financial stability.