- Top EU lawmakers are arguing that retail investors might end up taking risky crypto bets amid soaring inflation.
- Lawmakers and crypto firms in the EU are demanding “a stable regulatory environment” for clear functioning.
Investors and regulators have been concerned with the current global macroeconomic setup and soaring inflation. Top securities regulator from Europe has warned that soaring inflation might push retail investors into investing in risky assets like digital currencies.
Thus, the regulator has demanded an urgent legal framework for the crypto industry. Verena Ross, chair of the European Securities and Markets Authority, said that she has been waiting with “great impatience” for the EU’s blueprint on crypto regulation and convert it into law. In an interview with Bloomberg on Wednesday, May 25, Ross said:
With inflation rising, investors will look to find investments which are able to try to compensate for inflation and bring greater returns, which might lead to greater risk taking. That is something we are monitoring very closely.
After the recent collapse of the Terra ecosystem, the European Central Bank (ECB) has demanded stricter regulations for digital assets. Besides, cryptos have been the most correcting asset class in the current scenario. Top cryptocurrencies like Bitcoin and Ethereum are down by more than 50 percent just over the last six months.
Currently, each individual nation in the European Nation has been applying its local laws for cryptocurrencies. This leads to individual countries taking different approaches. Ross said:
There is no EU regulatory framework for these kinds of entities at the moment and so there is currently an imbalance in how national supervisors deal with these entities and how they judge them. That’s where a common regulatory framework will help.
Demand for consistent crypto regulations in Europe
Lawmakers have been demanding consistent cryptocurrency regulations and rules across Europe. Back in 2020, lawmakers had also proposed the Markets in Crypto-Assets Regulation — or “MiCA” as a way to standardize crypto regulation in Europe. The European Parliament and Council are currently reviewing it.
Ross has further called the need to speed up the process and have clear crypto rules by 2023 or 2024. On the other hand, some crypto firms are also in support of clear regulatory rules. Crypto exchange Binance which recently secured regulatory approval from the French government has demanded a “stable regulatory environment”. A Binance spokesperson said:
A consistent set of regulations implemented across Europe would be beneficial to everyone and MiCA has the potential to be foundational in establishing Europe at the forefront of this new industry.
Some market analysts, however, argue that lawmakers are just using inflation as a proxy to push crypto regulations. Ian Taylor, head of the crypto and digital assets team at KPMG UK, said that there’s no concrete evidence of consumers opting for crypto amid the soaring inflation.
Related: German BaFin official calls for uniform Defi regulation across the EU