By Another day and another move towards crypto regulation. This time a group which serves as an advisory to the European Securities and Markets Authority or ESMA which is the EU’s securities watchdog has gone on recommendation, advising that cryptocurrencies & ICO’s should be regulated under existing financial rules with more clarification.
The Securities and Markets Stakeholders Group (SMSG) said in a report released on the 19th of October that due to the fact that transferable crypto assets used in payments (ie BTC) are considered more each day to be investments, the related risks that come with them are closely related to those which are seen in capital markets.
The SMSG, therefore, recommends that the ESMA should consider aforementioned assets under the EU’s MiFID II (Markets in Financial Instruments Directive II) regulations. These regulations were passed back in February this year.
The SMSG does play an advisory role to the ESMA but it must be noted that the agency itself does not hold the power to implement this in the EU regulation.
The report stated this on the matter:
“This is however not in ESMA’s power, since it would require a change in the Level 1 Text of MiFID II, so the SMSG can only urge ESMA to consult with [the European Banking Authority] on this matter and take this up with the European Commission.”
The report went on to cite the Filecoin crypto project adding that transferable “utility tokens” potentially carry risks for investors & thus should be regulated under MiFD II while on the opposite end of the spectrum non-transferable utility tokens need not.
If a particular asset gives the right to financial entitlement, it bears features of that of bonds or shares according to the report and if said token is indeed transferable then it shares “important characteristics with transferable securities under MiFD and thus is subject to MiFD II and the Prospectus Regulation.”
Of course, the ESMA needs to clarify what qualifies as a “transferable security” claimed the SMSG, and outline relevant guidelines as well as provide correct clarification as to whether transferable asset tokens that give right to financial entitlement should be considered under MiFD securities.
The SMSG argues that if an asset token is non-transferable then it sees “no need” for regulation.
The report also favored the creation of national sandboxes as well as innovation hubs for startups which are token-based but it was also suggested that the ESMA should be responsible for ensuring that “sufficient quality, transparency and legal security of national initiatives.” are met.
Should cryptocurrency assets be treated in the same way as fiat bonds & shares? Let us know your thoughts.
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