EU’s proposed crypto regulations are flawed

As the crypto world goes through yet another bout of turmoil, it is clear that stronger regulatory oversight of digital assets is needed. The EU will soon roll out a specific regulatory framework for cryptocurrencies and markets. The move comes as digital assets are plunging and a crisis has engulfed some of the world’s biggest 'stablecoins'.

Cryptocurrencies have become popular despite the fact that there is very limited or no oversight. Whether they are Ponzi schemes, money-laundering shells or stablecoins pegged to real-world assets, it is difficult for ordinary investors or users to know which is which. Where they are based, how they are organised and who is backing them is often an enigma. This is a cause of concern.

But there are reasons why EU proposals are not the right remedy. Under the planned regulations, only crypto coins authorised in the bloc can be offered to investors. But crypto assets and exchanges will have a very light supervisory regime, much less than what is in place for financial instruments and other exchanges. That raises the question about why distinct rules are needed.

Karel Lannoo is General Manager of ECMI and CEO of CEPS. This opinion was originally published in the FT on 16 May.