EU Investigates Crypto Asset Rules to Protect Investors
The European Commission has launched an inquiry into the protection of investors’ redemption rights in the EU’s crypto asset market. Specifically, the Commission is examining whether EU rules safeguard investors who hold identical e-money tokens (EMTs) pegged to a single official currency.
The Background
Last year, France’s banking and insurance supervisor, Autorité de contrôle prudentiel et de résolution (ACPR), requested the European Banking Authority to investigate the possibility of having technically identical and fully fungible EMTs issued by both EU-licensed entities and non-EU entities not subject to EU rules. The European Banking Authority subsequently referred the matter to the EU Commission, citing the need for interpretation of EU law.
MiCAR: A Regulatory Framework for Crypto Assets
In 2023, the EU adopted an extensive set of rules for crypto assets, known as MiCAR. Under MiCAR, issuers of EMTs must obtain supervisory clearance to operate and hold reserves, including bank deposits, against tokens sold to ensure they can repay investors when required. This regulatory framework aims to provide a clear and stable environment for crypto asset investors.
Global Regulatory Landscape
Meanwhile, in the United States, President Donald Trump has pledged to ease the regulatory burden on cryptocurrency companies. The U.S. Securities and Exchange Commission has established a task force to develop new rules for the industry. Some issuers, such as Circle, operate both within and outside the EU, raising questions about the consistency of regulatory approaches across jurisdictions.
The Fungibility Question
France’s ACPR has also inquired about the possibility of allowing only EU customers to present redemption requests to EU-based entities in cases where identical EMTs are issued both within and outside the EU. However, the ACPR declined to comment further on this matter.
Expert Insights
Andrea Resti, a finance professor at Milan’s Bocconi University, notes that “the MiCA regulation already has quite a bit of flexibility built in, to avoid stifling innovation.” He cautions that interpreting the rules in ways not clearly spelled out in the text could engender risks and weaken the effectiveness of the newly minted rules. As the EU Commission continues its investigation, the crypto asset industry will be watching closely for any developments that may impact investor protection and regulatory clarity.
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