Crypto-asset markets are developing rapidly and banks are considering whether to participate, and it is the task of the European Central Bank – as the authority responsible for bank authorizations under European banking supervision – to ensure that they do so in a secure and robust way. . In this sense, the ECB says it is ready to harmonize the rules with which banks offer cryptocurrencies, to ensure that the credit institutions of the individual Eurozone countries have the necessary skills and capital to operate in this sector. This was announced in a note by the Frankfurt institute, led by Christine Lagardeafter various European legislators have often described the digital assets sector with a “regulatory Far West” on which action should be taken as soon as possible.
There is currently no harmonized regulatory framework governing cryptocurrency activities and services in the EU. This situation will change with the finalization of several regulatory initiatives at European and international level that will define the broader regulatory framework within which cryptocurrency activities are permitted and how banks must manage the risks they entail. Within the EU, the Council presidency and the European Parliament recently reached an interim agreement on the crypto-asset markets (MiCA) proposal, which will bring crypto-assets back into a regulatory framework. Internationally, the Basel Committee on Banking Supervision is monitoring banks’ exposures to crypto assets and will publish detailed rules on the prudential treatment of such exposures in due course.
Meanwhile, the national regulatory frameworks governing crypto assets diverge significantly. In Germany, some cryptocurrency activities are subject to the banking license requirement and, to date, several banks have applied for authorization to carry out such activities. As with any other authorization procedure, the ECB and the national competent authority apply the criteria of the Capital Requirements Directive (CRD) when evaluating applications for authorization for crypto-related activities and services. In doing so, the note continues, the ECB pays particular attention to the following aspects:
- business models: the way in which the proposed activity corresponds to the overall activity and risk profile of the institution;
- internal governance: whether the institution’s policies and procedures are adequate to identify and assess the unique risks of crypto-assets; And
- assessments of suitability and correctness: in this case, the same general criteria of suitability and correctness apply as for any authorization procedure, including IT competence. The greater the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of cryptocurrencies must be. Senior managers or board members with relevant IT knowledge and chief risk officers with solid experience in this area are important guarantees.