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Crypto-asset activities and markets in the European Union: issues, challenges and considerations for regulation, supervision and oversight

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Abstract

Crypto-assets are rapidly becoming a mainstream phenomenon in the global financial system. This is owing to developments in technology, an increase in token issuances and the existence of tens of thousands of old and emerging crypto-asset projects around the world. There is consensus that the financial sector stands to gain from crypto-assets, for example in terms of cost reductions, increased effectiveness and openness. The rapid expansion of cryptocurrencies' ecosystem has intensified the attention of regulatory communities. Regulators are increasingly being challenged to respond fast and appropriately to protect customers, investors and populations from crypto-related risks, address the risks themselves and still promote technological advancement in this area. Currently, there are notable crypto regulatory loopholes in many jurisdictions of the world, not the least of which are those in the European Union. These gaps have helped to add to legislative ambiguity and weak protection of investor and property rights as regards to cryptocurrencies. Several European countries have made proactive attempts to develop domestic regulatory frameworks for crypto-assets. Many national, regional and international supervisory and regulatory institutions have participated in the crypto discourse which is demonstrated by issuance of various reports, analyses and policy statements highlighting risks and providing regulatory proposals. Following thorough consultation and review of the cryptocurrency ecosystem, the European Commission has recently asserted its authority over these very dynamic virtual assets and launched a framework for a regulation on Markets in Crypto-assets to address the risks germane to the crypto-asset markets within the context of the European Union. This research paper evaluates the European Union's present regulatory approach to cryptocurrencies. Particularly, the paper focuses on the issues, challenges and consideration of these approaches. The paper synthesizes extant research findings, expert opinions and institutional reports of the major regulatory, supervisory, oversight and advisory bodies, as well as those of relevant national and international agencies within the European Union.

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    Christoph Wronka

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Wronka, C. Crypto-asset activities and markets in the European Union: issues, challenges and considerations for regulation, supervision and oversight. J Bank Regul 25, 84–93 (2024). https://doi.org/10.1057/s41261-023-00217-8

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