Regulatory authorities in Europe offer guidance on assessing Crypto entity suitability

Regulatory authorities in Europe offer guidance on assessing Crypto entity suitability

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have jointly unveiled a consultation paper, presenting two drafts of guidelines aimed at evaluating the suitability of key stakeholders within the cryptocurrency industry. These stakeholders encompass management body members and shareholders or members holding qualifying stakes in entities dealing with asset-referenced tokens (ARTs) and crypto-asset services (CASPs).

The first set of proposed guidelines outlines a comprehensive approach for assessing the suitability of shareholders or members with direct or indirect holdings in ART and CASP issuers. This framework covers the process of authorizing the issuance of ARTs and CASPs, as well as conducting prudential assessments for potential acquisitions.

The second set of guidelines pertains to the evaluation of the suitability of management body members in firms dealing with ARTs and CASPs. These guidelines set forth standardized criteria to assess their knowledge, expertise, integrity, and their ability to commit sufficient time to their roles.

The objective behind these guidelines is to ensure the integrity of the cryptocurrency market and its associated services, fostering trust among stakeholders. By providing a clear and standardized framework, they aim to reduce the potential for inconsistencies and regulatory arbitrage. Stakeholders and the public have until January 22, 2024, to contribute their insights during the consultation period.

Anticipating future regulatory developments, the European Union’s banking regulator has also urged stablecoin issuers to voluntarily adopt specific “guiding principles” related to risk management and consumer protection.

The EBA had previously introduced a set of measures for public input on July 12, with the intention of clarifying the requirements of the Markets in Crypto-Assets regulation (MiCA), set to take effect on June 30, 2024. These steps demonstrate a concerted effort to bring clarity and oversight to the evolving crypto landscape in Europe.