Steven Maijoor, who chairs the European Securities and Markets Authority (ESMA), has shown support for further regulation of crypto assets. Maijoor said he would like to see financial instrument regulation applied to cryptocurrencies in line with Europe’s securities laws, ostensibly to “help protect investors.”
‘Financial Laws to Protect Crypto Investors’
“Where crypto assets do not qualify as financial instruments, we are concerned that the absence of applicable financial rules leaves consumers exposed to substantial risks,” Maijoor was quoted by political publication Roll Call as saying on Feb. 27. The ESMA chairman was speaking at the Fintech Conference in Brussels earlier this week, in a prepared speech.
Whereas ESMA and another European regulator have since recommended the creation of tailor-made laws for the cryptocurrency industry, Maijoor would like to add to that new rules on initial coin offerings (ICOs). In the U.S., the Securities and Exchange Commission has charged sponsors of certain ICOs with violating federal laws, even though there’s no consensus on whether or not these were securities.
Maijoor also backed the broadening of Europe’s anti-money laundering rules to include the exchange of one digital asset for another, and not only the exchange between cryptocurrency to fiat money. Clarifying his position, he stated:
Without new rules, digital assets will likely fall outside of the regulation of Europe’s securities laws.
Crypto Regulation Headache
Cryptocurrency regulation has become a major focal area for governments all around the world. Existing legislation could not have anticipated the emergence of decentralized virtual currencies like bitcoin, which thrive on their freedom from government control. So, in their hope of effecting legislative control, regulators have struggled to qualify crypto assets as either commodities or financial instruments, as they do not fall into readily defined financial categories.
Many are still undecided on how to define them. In the U.S., for example, individual states are not in agreement on whether cryptocurrency companies should obtain money transmission licenses. However, the federal government seems to allow direct transactions of virtual currencies without regulation unless such transactions constitute fraud.
According to Roll Call, Maijoor explained that most European jurisdictions agree that crypto assets should be regulated if they have attached profit or dividend rights, making them similar to traditional financial instruments. This would mean a lot more involvement by European regulators in an asset class that boasts a variety of use cases, providing utility rights and others, including functioning as a means of exchange.
“This makes it plain to see that we cannot legally qualify crypto assets via a ‘one size fits all’ approach,” Maijoor said.
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