Finance Monthly. Fron t Cove r Fea t ur e 11 2022 has been dubbed the crypto winter with huge falls in the value of cryptocurrencies and some high-profile failures in the sector, including FTX and Terra. This has led to a dilemma for policymakers in Europe. The focus on competitiveness means some want to welcome this innovative technology that many people continue to believe has an exciting future. However, the risk to investors, financial stability and even the ability to police and control the supply of money is causing sleepless nights in some institutions. The EU is, as usual, ahead of the international game when it comes to producing regulation. Its flagship regulation, MICA, is agreed and ready to pass into law (although it will be some time before it needs to be adhered to). The EU has also advanced its work on digital currencies and the ECB is currently pulling together a group on rulebook development. Similarly, the UK is preparing consultations on crypto asset regulation and digital currency. Except for new powers around financial promotions, new regulation is not expected in 2023. However, the direction will be set in 2023. Whether the UK and EU adopt similar approaches remains to be seen. A competitive environment could emerge where each jurisdiction seeks to be at the forefront around, for example, blockchain adoption or central bank digital currency. This might introduce risks around intended consequences, where regulatory approaches are not properly analysed in a rush to move forward. Equally, there could be excessive caution that limits the development of the sector in Europe. It will also be interesting to see how the UK and EU overcome the dichotomy of regulators, who will be very concerned about the risks, versus those who want an environment focused on innovation. CRYPTO “The EU is, as usual, ahead of the international game when it comes to producing regulation. Its flagship regulation, MICA, is agreed and ready to pass into law.”
RkJQdWJsaXNoZXIy Mjk3Mzkz