Regulatory measures to ensure a common approach to regulating cryptoassets across the EU is needed, according to a new EU-backed study.
The study highlights a number of areas where the regulation of cryptoassets could be strengthened, particularly in the European financial crime regime for virtual currencies, and in legislation governing investment into cryptoassets.
Financial services expert Rachael Preston of Pinsent Masons said this echoed wider discussions in the financial services sector about the regulation of cryptoassets.
“This serves as a useful indication of its key concerns and high-level recommendations. What this means on a practical level remains unclear, but what is apparent is that an EU-wide consensus must be reached before substantive and meaningful legislative changes can be enacted in this area,” Preston said.
The study said some cryptoasset services had been brought within scope of the existing anti-money laundering and terrorist financial legal framework through the 5th Anti‑Money Laundering Directive in 2018, but European regulation had since failed to keep up with the ever-evolving environment for cryptoassets.
According to the European Parliament, the European financial crime regime for virtual currencies falls short of the current international standard for cryptoassets. Steps to enhance current legislation could include widening the current legal definition of “virtual currencies” to include other crypto-assets including tokens; and extending the legal definition of “obliged entities” to include crypto-asset to crypto-asset exchanges, certain trading platforms and financial service providers who are active in the distribution of crypto-assets.
The study’s authors also suggested that Europe could introduce an anti-money laundering watchdog to promote information-sharing, serve as a new knowledge pool, and provide a more independent approach to instances of money laundering and terrorist financing. In parallel to this, international and national enforcement agencies alike must be empowered to detect breaches in the law and take meaningful enforcement action to ensure the effective oversight of cryptoassets.