The European Union is one of the largest markets for cryptocurrencies, home to 30% of projects funded by initial coin offerings (ICO). So far, this market has been a no man’s land without any kind of specific regulations.
By contrast, countries like Australia, Singapore and Japan already have regulations for crypto assets, and the US Securities Exchange Commission is in the process of evaluating the cryptocurrency market. But now the European Securities and Markets Authority (ESMA) is getting ready to start its own assessments of ICOs and crypto assets.
A Case by Case Approach
The chair of ESMA, Steven Maijoor, spoke before the economic affairs committee of the European Parliament on the need to start evaluating crypto assets in order to determine the regulations to be taken concerning them.
Some of these ICOs are like a financial instrument. Once it is a financial instrument it comes under a whole regulatory framework. The subsequent question is what do we do with those ICOs that are outside the regulatory world. We will assess that as a board. We expect to report by the end of the year, said Steven Maijoor.
He further explained that all ICOs taking place on the European territory will be examined on a “case by case” basis in order to discover which ones of these fall under the existing regulations for securities.
“Some of these ICOs are like a financial instrument. Once it is a financial instrument it comes under a whole regulatory framework.”
Warnings Are Not Sufficient
So far, the regulatory bodies of the European Union have issued various warnings to consumers concerning the risk associated with investments in crypto assets. However, this stance is not sufficient, according to Andrea Enria, the chair of the European Banking Authority.
This is not working as expected. Consumer warnings don’t seem to be sufficiently effective in raising awareness among consumers that there is a lack of safety net for these investments, stated Andrea Enria.
The First Steps Taken by EU in Crypto Land
Despite the sizable proportion of ICOs taking place on its territory, the European Union has not taken great strides to regulate it. The first step in this direction came in March, when ESMA established certain rules on contracts for differences (CDFs) and binary options. These rules are in effect starting with the 1st of August and limit the leverage for cryptocurrency margin trading to 2:1.
Then, at the beginning of September, a report prepared for the ministers of finance across the EU instructed them to adopt common rules on cryptocurrencies and monitor the manner in which these assets are traded.
Interested in learning more about the ways regulations impact crypto? Check out this article!