National governments are pushing back against the European Commission’s efforts to centrally supervise crypto-asset service providers (CASPs), dealing a blow to its push to boost oversight of the rapidly growing but opaque area of finance.
A note prepared by the Cypriot government, which currently holds the rotating EU presidency, states that member states oppose the Commission’s call for all CASPs to be directly supervised by the European Securities and Markets Authority (ESMA), the bloc’s Paris-based financial watchdog.
Shifting oversight of all CASPs to ESMA is a key feature of the Commission’s ‘Market Integration and Supervision Package’, which is part of Brussels’ broader push to channel trillions of euros in EU citizens’ private savings into growth-boosting investments – and thus create a ‘“Savings and Investment Union”.
Member states have raised “concerns regarding [the] proportionality” of the Commission’s proposal to directly supervise CASPs, states the note, which will be discussed by EU finance ministers in Brussels next week.
“The discussions to date favour a more targeted approach (e.g. ‘significant only’), that leaves small, purely local providers under national oversight or retaining national supervision,” it adds.
The pushback comes amid growing concerns about the crypto sector’s risks to Europe’s financial stability. A report released last year by the European Central Bank found that eurozone banks have “limited” but “growing” exposure to the crypto ecosystem.
It also comes amid fears about the lack of oversight of the crypto sector, with the ECB having warned of “blind spots” in the current supervisory landscape. The Commission argues that CASPs “are inherently cross-border in nature”, and that therefore “supervisory expertise should be built centrally to avoid exposure from the start”, the Cypriot note states.
The pushback by EU capitals also comes amid a broader dispute about whether supervision should be centralised at all. The so-called E6 group – which includes Germany, France, and the next four largest member states – has expressed broad support for boosting ESMA’s powers. But smaller countries, including Ireland and Luxembourg, fiercely resist this.
Despite this division, the note suggests that EU capitals are broadly united in opposing other aspects of the Commission’s proposal.
These include resistance to the proposed reform of ESMA’s governance structure, and demands for Brussels to clarify who would bear the resolution costs “in the event of a crisis” for ESMA-supervised central securities depositories.
Source:
www.euractiv.com