The head of the EU’s banking regulator has struck back at calls to regulate cryptocurrencies in a speech that warned against overly regulating fintech firms.
Andrea Enria, the chief executive of the European Banking Authority, suggested on Friday it would be more effective to prevent banks and other regulated financial institutions from holding or selling cryptocurrencies rather than regulating the digital coins themselves.
His comments come a week after Mark Carney, the governor of the Bank of England who also chairs the G20’s Financial Stability Board, called time on the lax regulation that cryptocurrencies had so far enjoyed. Mr Carney was just the latest central banker to urge a tightening of scrutiny.
“Recently, several central banks have argued that cryptocurrencies lack the institutional back-up of a central bank and cannot fulfil the traditional functions of money . . . I am yet to be convinced that this is a sufficiently strong argument to attract cryptocurrencies under the full scope of regulation,” Mr Enria said in a speech in Copenhagen, according to prepared comments.
He added that the EBA back in 2014 had suggested a better strategy of limiting regulated companies’ exposure to cryptocurrencies.
The FSB, which makes recommendations to the G20 nations, is due to lay out its thinking on cryptocurrencies later this month. Meanwhile, the EBA is in the process of establishing a “road map” around fintech developments.
More widely, Mr Enria advocated not applying the full weight of regulations to fintech firms if they did not perform the same functions of providing liquidity, credit and debit. He also said an EU-wide approach was essential if fintech firms were not to lose out to competition from China and the US.
“An excessive extension of the regulatory perimeter . . . is likely to be a sub-optimal solution. It would risk excessively constraining financial innovation, as the compliance burden placed on banks is not sustainable for small innovative start-ups,” he said.
However, he added that regulators should “never let de facto banks combine deposit-taking and lending outside the umbrella of strict regulatory requirements and effective supervision”.