Elizabeth McCaul, a supervisory board member of the European Central Bank (ECB), has called for additional oversight of crypto firms operating in a borderless state outside typical attempts at supervision.
In an April 5 blog post, McCaul said there was currently no adequate regulatory or supervisory framework for crypto firms, but the collapse of the FTX exchange helped shed light on the problem. She called on policymakers to address potential gaps in existing frameworks which could lead to bank failures, citing the collapses of Silicon Valley Bank and Signature Bank in the United States.
“In the crypto world […] The very concept of borders and jurisdictions is being challenged,” said McCaul. “How can we supervise firms that have no physical borders? We need to put more thought into imagining what international coordination will look like and how it can be effective in regulating the crypto world.”
We need to identify and close gaps in the global supervision of crypto markets, says Supervisory Board member Elizabeth McCaul. We need better international coordination and stronger consolidated oversight.
— European Central Bank (@ecb) April 5, 2023
According to McCaul, a framework governing crypto proposed by the Financial Stability Board and the Basel Committee on Banking Supervision was “very much in its infancy,” expected to go into effect in 2025. Pending laws, including the Markets in Crypto Assets framework, could effectively complement those from the BCBS in Europe, but likely wouldn’t completely address supervision of crypto firms claiming no headquarters.
“Exchanges like FTX conduct their operations by leveraging a group structure, while MiCA applies only at the individual entity level. In my view, large players like FTX or Binance need a consolidated approach, even if this requires adjustments to existing legislation.”
The ECB is currently investigating the potential impact of a digital euro on the European Union’s financial system, including policy issues and how the token could provide payment solutions for retail users. In January, ECB executive board member Fabio Panetta addressed the European Parliament, outlining a plan for a digital euro to be used alongside cash in retail payments.