European Regulators Call for 'Common EU-Wide Approach' on Cryptocurrency Regulations

Two major European regulators, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have recently called for a ’common EU-wide approach’ to cryptocurrency regulations, in order to ensure investor protection.

According to a recently published report, the EBA has asked the European Commission to look into unified rules on cryptocurrencies, and noted cryptoasset activities aren’t currently falling under existing EU laws but are “highly risky” for investors.

As such, as first reported by CoinDesk, the regulator urged the Commission there’s a need for a “comprehensive cost/benefit analysis, taking account of issues inside and outside the financial sector, to determine what, if any, action is required at the EU level at this stage.” The regulator’s executive director, Adam Farkas, stated:

The EBA's warnings to consumers and institutions on virtual currencies remain valid. The EBA calls on the European Commission to assess whether regulatory action is needed to achieve a common EU approach to crypto-assets. The EBA continues to monitor market developments from a prudential and consumer perspective.

The EBA also asked the Commission to take into account the crypto-focused guidelines the Financial Action Task Force (FATF), the global anti-money laundering (AML) watchdog, is expected to issue this year. The EBA itself revealed it plans on monitoring the crypto sector.

The European Securities and Markets Authority (ESMA) also published a report on cryptocurrencies and initial coin offerings (ICOs). In it, it claims some cryptoassets could fall under the European Union’s MiFID financial framework and be considered financial instruments.

Steven Maijoor, ESMA’s chairman, noted some adjustments would have to be made as “existing rules were not designed with these instruments in mind,” which means “certain requirements are not adapted to the specific characteristics of crypto-assets.”

As for the cryptocurrencies that wouldn’t fall under MiFID, these would still have to comply with AML rules. To further protect investors, risk disclosure should be enforced to alert them of potential risks. Maijoor added:

In order to have a level playing field and to ensure adequate investor protection across the EU, we consider that the gaps and issues identified would best be addressed at the European level.

Meanwhile, as CryptoGlobe covered, the cabinet of the Irish government has approved a law to implement a new regime of financial regulations, a large part of which outlines regulations for the cryptoasset industry in the country.

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BitMEX Slammed as Roubini Raises the Stakes in War Against Crypto

Neil Dennis

Every new concept has its critics and there's none so vehemently opposed to cryptocurrencies as New York University academic Nouriel Roubini, who has just taken his most vicious swipe yet at the emerging asset class.

In an essay entitled "The Great Crypto Heist", published this week on the website Project Syndicate, the NYU Stern Business School professor accuses financial regulators of "being asleep at the wheel" while an army of unregulated exchanges, propagandists and scammers commit "rampant fraud and abuse".

He singles out crypto-derivatives exchange BitMEX as being a particular threat to retail investors. Roubini clashed earlier this month with Arthur Hayes, the chief executive of BitMEX.

Regulation

But first, the professor explains why the sector needs to be more closely monitored. The broader financial sector came under increased regulatory scrutiny following the 2008 financial crisis, to protect investors and society. 

The regulatory regime does not capture cryptocurrencies, however, which are launched and traded outside the domain of official financial oversight, he says.

The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot.

BitMEX

He rounds on BitMEX, registered in the Seychelles, which offers highly-leveraged bets on the rises and falls of cryptoassets: products more broadly known as derivatives.

These investment products have come under the microscope of regulators in many countries. The UK's Financial Conduct Authority would like to ban the sale of cryptoasset derivatives and exchange-traded notes to retail customers, saying they are too difficult to value and are prone to extreme price movements due to the volatile moves of the underlying cryptoassets.

Other global regulators have made moves to reduce the amount of leverage offered by crypto-derivatives exchanges. Roubini points out that with a 100-1 leverage, even a 1% price move in the underlying assets could trigger a margin call that wipes out the investor's entire account and leave them owing the exchange.

Hayes, boasted openly that the BitMEX business model involves peddling to 'degenerate gamblers' (meaning clueless retail investors) crypto derivatives with 100-to-one leverage.

BitMEX aslo runs a proprietary trading desk - an internal, for-profit desk that trades cryptocurrencies with its own money - that has been accused of front-running its own clients, Roubini asserts. He adds:

Hayes has denied this, but because BitMEX is totally unregulated, there are no independent audits of its accounts, and thus no way of knowing what happens behind the scenes.

Perhaps his most grand accusation in the essay, however, is that exchange is being used for criminal activity:

BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions.

Tiff in Taipei

Roubini accused Hayes this month of holding back the broadcast of a video recorded of their clash at conference in Taipei - to which Hayes had secured exclusive right to.

In the essay, he continues this accusation, saying:

I suppose this is par for the course among crypto scammers, but it is ironic that someone who claims to represent the 'resistance' against censorship has become the father of all censors now that his con has been exposed.

Crypto Cancer Metastasized

In his final dig at the industry, Roubini says crypto trading has created a multi-billion dollar industry that does not just include the exchanges, but also "propagandists posing as journalists, opportunists talking up their own books and lobbyists seeking regulatory exemptions.

It is time global regulatory bodies stepped in, he concludes:

So far, regulators have been asleep at the wheel as the crypto cancer has metastasized. At a minimum, Hayes and all the others overseeing similar rackets from offshore safe havens should be investigated, before millions more retail investors get scammed into financial ruin.

So far, Hayes appears to have remained silent following the article's publication. No activity on his Twitter account. But the ball is now firmly in his court as the war of words heats up.