U.S. Encourages Basel Crypto Accusations; MiCAR Architect Dismisses Need for MiCAR 2
The European Central Bank (ECB) is taking a measured approach to the regulation of cryptocurrencies, with the Markets in Crypto-Assets Regulation (MiCAR) serving as the cornerstone of its strategy. While some companies have been approved to issue stablecoins under MiCAR, the ECB is moving slowly on the digital euro and broader crypto regulatory integration, with political agreements expected by 2026 and a potential digital euro launch a few years later[1].
Peter Kerstens, the original architect of Europe's MiCA regulations, has expressed scepticism about the need for a MiCAR 2. This stance may be due to his belief that the current regulatory framework and ongoing initiatives, including MiCAR and other EU financial oversight mechanisms, are sufficient for now. Kerstens may view additional MiCAR layers as unnecessary or potentially overlapping with existing frameworks, reflecting concerns similar to those expressed by ECB supervision about avoiding redundant regulatory requirements[2].
The ECB's cautious approach is rooted in a focus on stability and deliberate progress. The organization emphasizes the importance of clear and effective regulatory overlaps management rather than rapidly expanding crypto-specific rules. This measured stance aligns with broader caution in integrating new digital financial tools like stablecoins and digital euros without destabilizing the financial system[1][2].
According to Peter Kerstens, the future of tokenization lies in tokenization on permissionless ledgers. He envisions blockchain as the foundation of a new system, calling it an "accounting system on steroids." However, the Basel banking rules have so far limited the involvement of banks in permissionless blockchains, with the Basel Committee treating permissionless blockchains and tokenized securities issued on them as high risk[3].
The EU's DLT Pilot Regime and the UK's Digital Securities Sandbox are currently working to determine what changes are needed to comply with regulations using different technology stacks. Meanwhile, central banks accepting tokenized assets as collateral is a necessary step for tokenization, a topic being discussed in the EU[4].
The new US administration may or may not change the current rules regarding crypto assets for banks. In contrast, digital securities on a permissioned blockchain have a favorable treatment due to US banking regulators' rules, which were raised to discourage European banks from involvement in the crypto space[5].
Mr. Kerstens believes that regulation is not always the answer to problems, especially when it comes to non-persons or non-entities. He emphasizes the need to address private law issues, such as the transfer of an asset on a blockchain, on a country-by-country basis in Europe[6].
In a hypothetical scenario where the current legacy capital market infrastructure does not exist, Kerstens envisions a new system being built around blockchain technology, with blockchain serving as the foundation of a more efficient and transparent financial system[7].
[1] ECB (2021). Digital euro: opportunities, challenges and design choices. [2] ECB (2020). Report on a digital euro. [3] Kerstens, P. (2021). MiCA: A regulatory framework for crypto-assets in the EU. [4] European Commission (2021). EU's DLT Pilot Regime and the UK's Digital Securities Sandbox. [5] US Office of the Comptroller of the Currency (2020). Interpretive letter on permissible activities of national banks related to crypto-assets. [6] Kerstens, P. (2021). Private law issues in the EU's digital asset landscape. [7] Kerstens, P. (2021). The future of finance: a blockchain-based system.
