This panel about crypto regulations was moderated by Jose Luis Perán, Head of Delivery for financial services at VASS. Coty de Monteverde, Blockchain Center of Excellence Director at Banco Santander, Francisco Maroto, Blockchain Lead at BBVA, and María Ñiguez Olalla, IT Lawyer at EJASO, provided valuable insights from the perspectives of banks and law.
Regulations Are Coming
Francisco compared the upcoming regulatory changes in the crypto market to the regulatory wave that occurred in the financial industry after the 2008 crisis. He believed that the crypto industry must prepare and invest to comply with the upcoming regulations.
All speakers highlighted the need for regulations in the crypto market to attract institutional money and protect retail customers from fraud and bankruptcy. Different countries are approaching crypto regulation at different speeds and in different directions, with some like Singapore and Switzerland already having regulations in place and others like China forbidding the use of cryptocurrencies.
The European Union’s regulations, such as the Markets in Crypto-Assets (MiCA) regulation and Digital Operational Resilience Act (DORA), aim to provide legal certainty, protect consumers, prevent market manipulation and financial crime, and professionalize the crypto sector.
Healthy markets need liquidity, protection and security. This is mainly brought by two factors: institutional money and regulation.Francisco Maroto, Blockchain Lead at BBVA
MiCA’s Impact on the Crypto Industry and Banks
According to Maria, MiCA regulations introduce compliance regimes for issuers of crypto assets. Different types of investments have different levels of risk and requirements. Issuers of e-money tokens (EMTs) face the strictest regime, while asset reference tokens (ARTs) require authorization and whitepaper approval. Other crypto assets are considered to pose lower risks, and while the issuers still need to present a specific substantive whitepaper, they don’t need the approval of the supervision.
On the other hand, crypto service providers, such as exchanges and custodial wallets, need to obtain a MiCA license and comply with governance and transparency obligations. Specific obligations depend on the type of service provided, such as having a custody policy for custodial wallets.
Maria believed that MiCA regulations can protect the customer and at the same time, give certainty for the institutions that want to start providing crypto services.
Coty, from the bank’s point of view, shared that MiCA regulations will impact the financial sector and crypto asset service providers. Banks must adapt and seize opportunities, while service providers will face challenges, including risk management, capital requirements, and compliance procedures. Therefore, collaboration between banks and service providers will be necessary.
More EBC insights on MiCA and crypto:
- MiCA and the Challenges of Regulating Crypto
- The Potential of Stablecoins and the Impact of MiCA Regulation
- The Future of Crypto Market-making: What’s the Role of Regulations and AI?
Other Relevant Regulations for Banks and Crypto
Apart from MiCA, there are three additional regulations that influence banks in the crypto space. The travel rule, which requires all financial institutions to pass on certain information to the next financial institution, has expanded to crypto asset service providers, requiring them to identify transaction sources and destinations for anti-money laundering reasons.
Another regulation is the Prudential treatment of crypto assets, which establishes standards to classify and manage assets, ensuring financial stability and setting appropriate capital levels.
The third relevant regulation, according to Coty, is the Pilot Regime. It is similar to a European sandbox that provides a safe environment for financial market infrastructures to test DLT applications, particularly in trading and settlement systems, for a duration of six years.
The panelist agreed that regulations will bring a positive impact on the crypto space, as they will provide more confidence to institutional players, protect the market with legal certainty, and offer protection to retail customers.
Watch the full panel to understand the coming regulations in the banking realm!