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Regulatory frameworks for digital currency in Europe | Yves Mersch | #LDNBlockchain23
Get insights on the regulatory frameworks for digital currency in Europe, including the upcoming ECB decision, financial sector concerns, and the Commission's proposal to balance innovation and stability.
- There will be a decision by the ECB’s governing council in October on moving from investigation to a pilot scheme for digital currency in the EU.
- The financial sector is critical of efforts to create a regulatory framework for digital currency, citing concerns over concentration risk and the potential for systemic risk.
- The Commission has used article 114 of the European treaties to propose a framework for regulating digital currency.
- The regulation aims to balance innovation with the need for stability and oversight, with a focus on mitigating systemic risk and protecting investor interests.
- The Basel Committee on Banking Supervision has set minimum standards for prudential treatment of crypto assets, which will be implemented by January 1, 2025.
- There are concerns over the concentration of validators and the potential for a single point of failure in decentralized finance (DeFi) platforms.
- The European Securities and Markets Authority (ESMA) and European Banking Authority (EBA) will have a role in regulating crypto assets, with a focus on protecting investors and maintaining financial stability.
- The regulatory framework will support innovation by providing a clear and proportionate set of rules, while also allowing for competitive development of digital currency markets.
- The ECB is concerned about the potential risks of decentralized finance (DeFi) platforms, including the risk of fraud and scam, and the need for better reporting standards and oversight.
- The regulation will cover all types of crypto assets, including tokens, stablecoins, and central bank digital currencies (CBDCs).
- There are plans for a pilot regime for CBDCs, with a focus on developing a clear and proportionate regulatory framework.
- The regulation will also cover the use of distributed ledger technology (DLT) and blockchain in payments, with a focus on improving the efficiency and security of payment systems.
- The Commission has proposed a directive on digital operational resilience, which will provide a framework for ensuring the resilience of digital services.
- The regulation will also cover the use of artificial intelligence (AI) and machine learning (ML) in financial services, with a focus on ensuring that these technologies are used in a responsible and transparent manner.