The “questionable practices” at now crumpled crypto interaction FTX would not have been allowed to happen under European Union rules now being finalised, a senior European Commission official said on Wednesday.
The crash in bitcoin led to a “crypto winter”, which saw the collapse of crypto exchange FTX, and earlier this week cryptocurrency lender BlockFi filed for bankruptcy safety. The European Union is agreeing new groundbreaking markets in crypto assets rules (MiCA), expected to come into effect in 2024 and putting the bloc at the forefront of regulating a sector which has shrunk dramatically.
Alexandra Jour-Schroeder, deputy director general at the Commission’s financial services unit, said it was a matter of urgency to complete approval of MiCA with a final vote in the European Parliament. There were questionable practices at FTX where there was no proper record keeping or separation of customer and company accounts, she said, counting that about 10% of the company’s clients were in the bloc.
It has to be implemented. That does of course not mean the commission will stop thinking after MiCA 1,” she said, adding the EU executive would look at decentralised finance, and crypto lending. “Let’s not do the second step before the first,” she said. FTX had a right to work in the EU from the Cyprus securities regulator, but it was suspended when the company’s problems began to evolve.
Steffen Kern, head of risk analysis at the EU’s European Securities and Markets Authority (ESMA), said there is evidence of market abuse, poor governance and lack of controls in crypto markets generally.