The European Central Bank, or ECB, laid the foundation for the criteria it would be considering when harmonizing the licensing requirements for crypto in Europe.
In a Wednesday statement, the ECB’s banking supervision division said it would be taking steps to regulate digital assets given “national frameworks governing crypto-assets diverge quite extensively” and seemingly differing approaches to harmonization following the passage of the Markets in Crypto-Assets, or MiCA, and the Basel Committee on Banking Supervision issuing guidelines for banks’ exposure to crypto. The ECB said it would apply criteria from the Capital Requirements Directive — in effect since 2013 — to assess licensing requests for crypto-related activities and services.
Specifically, the central bank will consider crypto firms’ business models, internal governance, and “fit and proper” assessments which apply to licensing other companies. In addition, the ECB said it will rely on national anti-money laundering, or AML, authorities and Financial Intelligence Units of respective countries to provide data necessary to assess potential risks.
“The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of crypto should be,” said the ECB. “Senior managers or board members with relevant IT knowledge and chief risk officers with robust experience in this area are important safeguards.”
According to the ECB, there is “work ongoing” to analyze the role crypto may play in Europe, which will “remain an area of focus for European banking supervision in years to come.” With the passage of MiCA, global regulators may begin to standardize rules for crypto service providers within the European Union.
On Aug. 2, the ECB released the results of a study which identified a central bank digital currency as the top choice for cross-border payments over Bitcoin (BTC) and other options. Officials previously pointed to the crash of Terra as a possible example of a stablecoin threatening the financial system, recommending supervisory and regulatory measures to reduce risk.