Verena Ross, the Chair of the European Securities and Markets Authority (ESMA), is issuing a strong call for the urgent and comprehensive regulation of the cryptocurrency sector within the European Union. She asserts that a robust framework is essential to safeguard investors navigating this volatile market.
In a recent interview, Ross emphasized the critical need for lawmakers to finalize and implement the EU's landmark framework for crypto oversight, MiCA. She voiced concerns that soaring inflation is driving retail investors towards high-risk digital assets in a desperate search for yield, potentially exposing them to significant financial harm. This trend, she warns, could foster a culture of excessive risk-taking within the market.
The current regulatory landscape across the EU is a fragmented patchwork. Individual national authorities are managing the crypto industry based on disparate local laws, resulting in inconsistent approaches and a lack of unified protection for this emerging asset class.
Highlighting the need for a common regulatory standard in the EU, Ross specifically focused on crypto exchanges, stating,
“There is currently no EU-wide regulatory framework for these entities, which creates a significant imbalance in how national supervisors treat and assess them. A harmonized set of rules is essential to address this gap and ensure a level playing field.”
The EU's strategy for standardizing crypto regulation hinges on the Markets in Crypto-Assets (MiCA) regulation, first proposed in September 2020. However, its journey to becoming law has been protracted. MiCA is currently under scrutiny by both the European Parliament and the Council.
Despite the slow pace, Ross remains optimistic, expressing her hope that the legislative review will conclude soon, paving the way for MiCA to be enacted into law by 2023 or 2024.
Ross is not alone in her call for stringent oversight. Christine Lagarde, President of the European Central Bank (ECB), recently described crypto as "worth nothing," while fellow ECB Governing Council member François Villeroy de Galhau dismissed the sector's promises of high rewards as an "illusion."
Additionally, the ECB has voiced concerns about the growing interconnectedness between the crypto industry and traditional finance. In its Financial Stability Review, the central bank noted that investors weathered a massive €1.3 trillion market loss without triggering immediate financial stability risks but warned that the market's continued growth, particularly of unbacked assets, will eventually pose a systemic threat.
