ECB Official Advocates for Bank-Like Regulation on Crypto Firms

• Crypto Firms Acting as Banks Must Be Regulated As Such, ECB Official States
• Crypto Companies and Deterritorialization
• Opacity within Crypto Firms
• Challenges Associated With Supervision

Crypto Firms Acting as Banks Must Be Regulated As Such, ECB Official States

The European Central Bank (ECB) Supervisory Board Chair, Andrea Enria, during an interview with four European Union media outlets, stated that crypto firms that begin to operate like banks should be regulated in the same manner. Enria stressed how challenging it could be to monitor crypto companies, primarily due to their provision of services that resemble traditional banking, including payments and decentralized finance (DeFi).

Crypto Companies and Deterritorialization

Enria highlighted that one of the main difficulties in this regard is the issue of deterritorialization. This refers to the fact that some of these entities do not have a specific, physical location for their headquarters. For instance, Binance, the world's largest crypto exchange, operates globally without a designated headquarters. The exchange recently settled a $4.3 billion dispute with the U.S. government for providing services to local customers without the required permissions.

Opacity within Crypto Firms

The 2022 collapse of the multi-billion dollar enterprise FTX$3.28 -5.38% revealed a great deal of opacity within crypto firms. Enria pointed out that such a setting presents an issue of consolidation as it becomes impossible to maintain an overall perspective of the business and the risks associated with these entities.

Challenges Associated With Supervision

Enria also noted the lack of an issuer in instances such as Bitcoin$42,260 -0.64% (BTC) or the absence of a clear entity within DeFi projects, making supervision difficult. The primary challenge lies in ensuring that entities conducting banking activities come under banking regulation and supervision. As EU officials face questions about virtual assets, the European Parliament is considering legislative proposals for a digital euro, anticipated to challenge private cryptocurrencies as a payment method.

Edited by Jonathan Stoker