Leading up to the G20 summit in June, the Financial Stability Board has detailed how the European Union and its member countries are regulating crypto assets, who the regulators are in each country and the scope of their oversight. In most cases, crypto assets are overseen by several regulators.
The Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, has listed four regulators for crypto assets in the European Union (EU).
The first is the European Commission which is responsible for planning, preparing, and proposing legislation, including any on cryptocurrency if it “decides to propose such legislation,” the Board clarified. The Commission also monitors the effectiveness of financial sector reforms and responds to emerging financial stability risks.
Another regulator is the European Banking Authority (EBA) whose functions include carrying out “regular horizon-scans in relation to innovative products and services,” including those related to crypto assets, “from the perspectives of monitoring the impact on the financial system, [and] the suitability of the regulatory perimeter under EU law.” The third regulator is the European Insurance and Occupational Pensions Authority which monitors the developments of cryptocurrencies and initial coin offerings (ICOs) in the insurance sector.
Lastly, the European Securities and Markets Authority (ESMA) is responsible for safeguarding the stability of the EU’s financial system. Regarding crypto assets, ESMA published advice to European institutions in January acknowledging that crypto assets with certain characteristics are financial instruments and should be supervised as such, the FSB elaborated:
The advice also recommended the establishment of a bespoke regime for certain types of crypto-assets that fall outside the scope of financial instruments under the Markets in Financial Instruments Directive.
A G20 country and FSB member, France has four regulators overseeing crypto assets. The Directorate General of the Treasury (DG Trésor) works under the authority of the Ministry for the Economy, Finance and Industry to prepare “financial market legislation and regulations of virtual assets, whether they are traditional financial instruments or assets that do not fall under the traditional financial rules,” the Board detailed.
Autorité des Marchés Financiers, the country’s securities and markets authority, regulates “crypto-assets that qualify as transferrable securities through the regulation and supervision of issuers and intermediaries in transactions involving crypto-assets.”
Furthermore, the FSB noted that Banque de France, in conjunction with the Autorité de Contrôle Prudentiel et de Résolution, oversees the financial sector and ensures the smooth operation of payment systems and market infrastructures, emphasizing:
Conversion of crypto-assets into fiat currency by internet platforms that play the role of intermediary between buyers and sellers is considered to be a payment service and an authorisation is required to provide such services.
Three regulators oversee crypto assets in Germany. The main one is the Federal Financial Supervisory Authority (Bafin) which is responsible for licensing and enforcement actions of crypto-related businesses.
Bafin is also responsible for the “Prudential oversight on licensed institutes including those offering crypto-asset related services,” the authorization of crypto derivatives, AML/CFT supervision, as well as market integrity and oversight concerning crypto assets, related offerings, and crypto trading platforms.
The second regulator is Deutsche Bundesbank. In cooperation with Bafin, the central bank supervises regulated financial services activities, including those “related to crypto tokens at financial institutions,” the FSB wrote. The bank also assesses the implications of crypto assets from the perspectives of payment system oversight and monetary policy.
Lastly, the Federal Ministry of Finance, Bundesministerium der Finanzen, is responsible for crypto-related legislation.
There are five regulators for crypto assets in Italy, according to the FSB. The Ministry of Economy and Finance contributes to crypto-related decision process at EU level and establishes the legal framework aimed at preventing their use for illicit purposes.
Then there is the central bank, Banca d’Italia (BdI), which is responsible for the smooth functioning of the payment system. The Board described:
In its capacity as overseer, BdI analyses crypto-asset developments and evaluates the related risks, given that they could have an impact on financial markets and payment system instruments and infrastructures.
Following the recent amendments to the country’s AML/CFT legislation, the Financial Intelligence Unit, Unità di Informazione Finanziaria per l’Italiain, “will receive and analyse suspicious transaction reports filed by crypto-asset operators,” the FSB noted. The regulator will disseminate “the results of the analyses to competent authorities for AML/CFT purposes.”
The next Italian regulator is the Institute for the Supervision of Insurance which “is closely following the development of crypto-assets in Italy and potential risk to the insurance system, both on the asset and on the liability side.” It also monitors insurance products with crypto assets as underlying investments.
The last regulator mentioned for the country is Commissione Nazionale per le Società e la Borsa which regulates crypto assets that are financial instruments. This includes the “supervision of trading venues, transparency of trading and orderly conduct of trading.” For crypto assets that are considered securities, the regulator conducts oversight of financial intermediaries and investor protection such as by ensuring “transparency and disclosure by issuers.”
Spain is a member of the FSB and the EU but not the G20. Nonetheless, it has been invited as a guest country at the upcoming G20 summit in Japan. There are four Spanish regulators listed for crypto assets.
Banco de España, the central bank, ensures “the proper working and stability of the financial system,” including the supervision of small institutions and their exposure to crypto assets, the Board conveyed.
The National Securities Market Commission, Comisión Nacional Del Mercado De Valores (CNMV), supervises and regulates crypto assets that are “financial instruments (and more specifically, transferable securities),” the FSB outlined:
In particular, fundraising activities where crypto-assets are issued, and they are considered as securities, will fall under the scope of the specific public offering regulation.
In addition, as part of its investor protection mandate, the CNMV monitors risks from crypto assets and publishes information on unauthorized entities as well as investor warnings concerning crypto activities. Another regulator, the General Directorate of Insurance and Pension Funds, Dirección General de Seguros y Fondos de Pensiones, regulates insurance companies, intermediaries and pension funds and their exposure to crypto assets.
Lastly, the Ministry of Economy and Competitiveness is responsible for the financial progress of the country. “Since innovator facilitators have gained importance, the Spanish Treasury has launched an innovative legal formula (the Spanish sandbox bill) that covers consumer protection, market integrity and AML rules, as well as enabling the development of financial thriving innovation,” the FSB concluded.
Three regulators have split a large number of responsibilities pertaining to cryptocurrencies in the U.K. HM Treasury develops policy and works with other regulators to “improve outcomes for consumers in the crypto-asset market,” including “ensuring a robust and effective regulatory framework and setting the regulatory perimeter,” the FSB claims. It also promotes “the development and adoption of innovative” financial technologies, which includes “applications of crypto-assets and distributed ledger technology.”
The Bank of England monitors “prudential exposures of banks and insurance companies to crypto-assets” and gives authorization to entities engaged in crypto activities. It is also responsible for assessing “financial stability risks” from crypto assets, their use for payments, and their implications for monetary policy.
The last regulator mentioned for the U.K. is the Financial Conduct Authority which oversees all regulated firms and financial services activities. It is responsible for the “Authorisation and supervision of firms using crypto-asset propositions,” as well as consumer protection and public warnings about crypto assets. The FSB detailed:
Any token that gives the token holder the same rights and obligations that a specified investment does is considered a security token and is therefore regulated.
The Board further confirmed, “Any token that meets the definition of e-money will fall under the scope of the Electronic Money Regulations. Firms using tokens to facilitate regulated payments may fall under the scope of the Payment System Regulations.”