EACH, an industry association built from the clearinghouses of Europe, gave a public statement expressing their preference for a single classification to cover all forms of cryptocurrencies across Europe. The EU, however, has intended to push for a more in-depth classification system when it comes to handling the crypto industry. This, in turn, will put larger pressure on the clearinghouses as they will have to handle the administrative burden.
Pushing For Mutually Beneficial Legislation
The legislation, dubbed “On an EU framework for markets in crypto-assets,” is seeking to add further standardization to regulations across the European Union, particularly for cryptocurrencies.
The comments regarding this new legislation came from the European Association of CCP Clearing Houses or EACH. The association represents 15 central counterparty clearinghouses situated within Europe and has recently voiced its concerns in regards to the proposed framework to regulate crypto. The organization, based in Belgium, has members including clearinghouses owned by Deutsche Boerse AG, ICE, and LSE.
EACH: Definitive Classifications Must Be Made
EACH was quick to point out that it welcomes the consolidation. Primarily, this is going to help avoid regulatory arbitrage, market fragmentation, and general inconsistencies that come from a nebulous framework. However, EACH made it clear that it wanted a distinct, precise categorization of digital assets between payment utility, security, or a hybrid asset. The association made it clear that this was of critical importance for future business.
EACH further highlighted the need for a gradual approach to regulation in these areas of trading, asset management, and post-trading, mainly for security tokens. The association represents the significant interests of the CME Group, LSE, and ICE, as they own several large clearinghouses within it.
Adapting To The Times
In regards to clearing activities, where they recieve collaterals in order to prevent default risks to start spreading throughout the entire system, EACH was quick to give a statement. The association explained that its members understood the potential impact that distributed ledger (DLT) technology holds for their various businesses. As such, they are already involved in various initiatives to try and explore its application within the financial markets, which might bring benefits to several sectors of CCP activities.
Furthermore, EACH explained that crypto wallet providers have already been officially defined within the rules of AMDL5. As such, these wallet providers are considered “obliged entities,” and must be subsequently regulated.
EACH gave a public statement, claiming that they benefits of clearing transactions through CCP will not be rendered obsolete. It explained that certain features, mainly the performance of collateral, default, and risk management processes as well as multilateral netting, will remain a unique aspect of central clearing. This will be true even if the entire industry moves to a distributed ledger format, according to EACH.