On Wednesday, a group of EU financial officials announced that crypto exchanges should lose their licenses if they commit serious breaches of AML, anti-money laundering rules.
The European Supervisory Authorities – EBA, EIOPA, and ESMA – made this recommendation on the advent of the proposed MiCA, Markets in Crypto-Assets Regulation, which is currently under negotiation.
The report states that authorities with the power to register and authorize crypto wallets and exchanges must be “empowered to withdraw it for serious breaches of AML/CFT rules.”
At the same time, the report also notes that the decision to revoke licenses should be considered a last resort, said the ESAs, which oversee banks, insurers, and securities across Europe.
Major players like Binance, the world’s largest crypto exchange by volume traded, have now registered in EU countries like France and Italy, and the bloc is tightening its anti-money laundering (AML) laws in the wake of multiple scandals involving traditional lenders like Danske Bank and Pilatus in Malta.
Regulators are Skeptical About Digital Tokens’ Value
The report comes as officials worldwide call for tighter oversight of the crypto market, especially due to the recent stablecoin collapse. Read More
Yesterday, the British government suggested a new system in which the Bank of England would take over the administration of the collapse of a stablecoin important to the financial system, a role currently performed by the Financial Conduct Authority.
Last month, President of the European Central Bank Christine Lagarde stated that regulators should enact new laws to ensure that people are less inclined to invest their life savings in cryptocurrencies.
She has expressed her concern about people losing investment when they have “no comprehension of the risks,” and she also expressed her doubts about the worth of digital tokens.
“It is worthless, founded on nothing, and there is no underlying asset to serve as a safety net,” she explained.
Lagarde assessed it to the upcoming launch of her bank’s digital euro, which she expects over the upcoming few years.
Crypto Asset Class Under Scrutiny
TerraUSD is an algorithmic stablecoin whose 1 USD value is determined by Luna. In May, the crypto market sell-off resulted in UST losing its dollar peg, and Luna plummeted to 0 USD. Terra has already issued a new version of Luna as a substitute. Still, the original Luna and UST collapse wiped approximately 60 billion USD in value and prompted concerns about the stability of stablecoins.
The Bitcoin market already has a bad repute for being exceedingly unpredictable and risky. Investor confidence in stablecoins, which are supposed to preserve value and are typically considered among the safest crypto investments, may be affected due to the Luna fiasco.
At the same time, the asset class is facing increased hostility from regulators worldwide, who are concerned about the repercussions on the monetary system.
The Federal Reserve’s June meeting, which takes place on 15th June, might significantly impact the cryptocurrency market. Investors are expecting another 50 basis point hike in interest rate. Still, any updates from Fed Chair Jerome Powell on the state of the US economy at his news conference might serve as a market catalyst.
Also, investors should watch out for the latest developments in bitcoin legislation. In April, Securities and Exchange Commission (SEC) Chair Gary Gensler stated that the SEC intends to register and regulate crypto platforms. The SEC recently reported that its cryptocurrency unit had nearly doubled in size.