Plans are underway for the European Central Bank (ECB) to create a harmonised regulatory framework for crypto-asset activities within the European Union (EU).

The ECB’s latest statement follows the Council presidency and European Parliament having recently reached a provisional agreement on the markets in crypto-assets (MiCA) proposal, a directive aimed at bringing crypto-assets under a regulatory framework.

A regulatory framework for crypto will move forward upon the finalisation of several regulatory initiatives at European and international level that will lay down the broader regulatory framework under which crypto activities are allowed, and how banks should manage the risks they pose, the ECB said.

The relevant national competent authority will apply the Capital Requirements Directive (CRD) criteria when assessing licensing requests covering crypto-asset activities and services.

The ECB stated that in doing so, it will pay particular attention to three areas.

The first area, business models, will scrutinse how a proposed activity matches the overall activity and risk profile of the institution.

Looking at internal governance, the ECB will assess whether the institution’s policies and procedures are adequate to identify and assess risks unique to crypto-assets.

Fit and proper assessment will also be conducted, and assess areas including IT strength and senior levels competence. The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of crypto is required to be.

From here, following ongoing work within the Single Supervisory Mechanism (SSM) on banks’ digital transformation, including the role of crypto technologies, will result in horizontal analysis by the end of 2022, the ECB said.

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