The European Central Bank (ECB) has paved the way for the licensing of digital assets. The institution plans that these licensing requirements will play a central role in developing a harmonized crypto regulatory framework for Europe.
Outlines requirements for regulating digital assets
The ECB banking supervision issued a statement on Wednesday saying that it would take steps to regulate the digital assets space as the countrywide frameworks for governing crypto assets diverged extensively.
Additionally, the different approaches are taken by different regulators after passing the Markets in Crypto Assets (MiCA) regulations and the Basel Committee on Banking Supervision would guide banks with crypto exposure.
The ECB said it would use the criteria provided by the Capital Requirements Directive that has been effected for around nine years. The directive would guide licensing requests for crypto activities and other services.
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The central bank will also consider the business models of these crypto companies and other factors like internal governance and proper assessments. These factors are also used to determine the licensing requirements of other companies.
The central bank will use the national Anti-Money Laundering (AML) regulators and other financial intelligence companies in respective countries to find the necessary data to assess the potential risks of the cryptocurrency market.
The ECB also added that the higher the complexity of the crypto business, the higher the knowledge and experience the regulators needed. Additionally, the senior managers and board members with relevant IT expertise and chief risk officers needed ample experience in the crypto space to develop better regulatory oversight.
Moreover, the ECB said there was ongoing work to analyze the role played by crypto in Europe. Crypto would also be a primary focus for banking supervisors in the coming years. The passage of the MiCA rules will also help global regulators standardize the European Union’s regulatory framework.
ECB believes a CBDC is better for cross-border payments
Earlier this month, the ECB released a study that showed CBDCs was a top choice in cross-border payments. CBDCs enabled cross-border transactions better than other currencies like Bitcoin and Ether.
ECB officials have also addressed the collapse of the TerraUSD (UST) stablecoin in May. The officials said that the collapse was a sign that stablecoins could disrupt the financial sector, urging that supervisory and regulatory frameworks be in place.