05 December 2022

Commissioner McGuinness at EU Delegation in London on the EU Crypto-Asset Strategy

... criminals and sanction evaders are using the anonymity of parts of the crypto system for illicit transactions. Now all that said, behind crypto is a technology with huge potential. This distributed ledger technology could make trading and settlement of securities more efficient.

The world is changing, and digitalisation is transforming finance across the globe.

Crypto assets are a case in point – in fact I know some argue that the words ‘crypto' and ‘assets''should not be put together.

The technology underpinning crypto has potential, but crypto also comes with risks, as we have seen all too clearly recently.

Well-known firms in the crypto world – such as FTX – have collapsed.  

And we have yet to see the full story of how or why this happened.

Hacks on crypto wallets are not uncommon.

Investor trust in so-called stablecoins, like Terra earlier this year, has been repeatedly undermined.

Too often promises turn out to be false, and very much unbacked promises.

Too often crypto has relied on “believers” in the system: with that “belief” backed by nothing more than words.

And criminals and sanction evaders are using the anonymity of parts of the crypto system for illicit transactions.

Now all that said, behind crypto is a technology with huge potential.

This distributed ledger technology could make trading and settlement of securities more efficient.

The use of tokenised electronic money could make payments more efficient and increase competition.

In the European Union, many interesting projects are being rolled out by both fintechs and longer-established companies.

There are many voices calling for order to be brought to what today is still the ‘Wild West' of crypto.

We need to root out bad actors, provide consumer protection and ensure financial stability and market integrity.

And as with the traditional financial system we need to guard against poor management.

The European Union is setting clear rules for previously unregulated crypto-assets, including ‘stablecoins'.

Our approach is to address the clear risks and shortcomings, while still enabling innovation to flourish.

With our EU Digital Finance Strategy, we aim to make the most of the opportunities of this transformation, without compromising on the safety of consumers or the financial system.

The strategy is our compass for the coming years.

So first, our sandbox-type pilot for distributed ledger technology for market infrastructures will already go live in March.

We're giving clearly defined smaller projects on DLT-based securities some regulatory flexibility to experiment with integrating trading and settlement.

We're giving companies a chance to demonstrate that this can be efficient for investors and can reduce risks in the financial system.

This is an opportunity both for existing companies and newcomers, and I know our supervisors are seeing a lot of interest in it.

In fact, in Spain recently I was pleased to see market participants who are ready to use this pilot project.

Second, in June, the EU became the first major jurisdiction in the world to agree a comprehensive framework for crypto-assets.

The Markets in Crypto-Assets Regulation, or MiCA, is based on the principle of passporting.

That means you need just one licence for the single market of 27 countries, 450 million consumers, 23 million businesses.

And this is our trademark, the DNA of the single market for financial services.

MiCA will give legal certainty to market participants and promote innovation in the market.

But it will also ensure that crypto-assets and crypto-asset service providers are subject to regulation and supervision.

MiCA will set the necessary organisational, operational and prudential requirements for crypto-asset service providers, like exchanges or wallet providers.

And the regulation will set out strict requirements on establishment, authorisation and reserve management for so-called ‘stablecoins' which refer to an official currency or a basket of assets.

MiCA will also require actors in the crypto-asset market to disclose information on the environmental and climate footprint of crypto-assets.

Regulators will supervise crypto markets....

 more at  Commission

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