The Association for Financial Markets in Europe (AFME) has published a new paper setting out five recommendations to deliver supervisory convergence on the regulation of crypto-assets in Europe.
The paper’s recommendations are intended to encourage collaboration between regulators in Europe and work towards a common approach to the regulation and development of crypto-assets in financial services.
James Kemp, Managing Director, Head of Technology and Operations at AFME, says: “There has been a rapid rise in the development of crypto-assets, which could offer significant benefits for wholesale markets. However, to realise those benefits, it is increasingly important that crypto-asset regulation is coordinated at the regional and global level to foster innovation, while promoting financial stability and ensuring a level playing field. This should start with forming a common understanding of the various crypto-asset terms and activities in financial services.”
In this paper, AFME provides an overview of the crypto-asset taxonomies and regulatory approaches in use by a sample of National Competent Authorities across Europe, outlining the areas where divergence in regulation exists.
The paper finds that while there is some convergence on the methods used to classify different types of crypto-assets, there is significant divergence in the methods used to regulate crypto-assets. This creates uncertainty for market participants, which limits innovation.
Europe has the potential to become a global leader in crypto-assets and to facilitate the emergence of safe and innovative products and services at scale. In order to reduce fragmentation and deliver supervisory convergence in the regulation of crypto-assets in Europe, AFME proposes the following five recommendations for regulators to consider:
1 Establish a pan-European crypto-asset taxonomy;
2 Provide clear expectations for market participants on the process for issuing crypto-assets;
3 Apply activities-based and technology agnostic regulation;
4 Apply existing regulation for regulated activities, with any necessary amendments if required;
5 Prioritise convergence of regulatory frameworks with other global and regional initiatives.
The paper has been developed with expertise from AFME member firms to provide a further assessment of the crypto-asset regulatory landscape in Europe.