This week, policymakers and regulators in Europe have continued issuing warnings about cryptocurrencies as “highly speculative assets” and renewed calls for “consistent and comprehensive” crypto regulation.
Meanwhile, the European Union Parliament debated the new Consumer Credit Directive, which may include buy now, pay later (BNPL) solutions, currently exempted. It will likely vote on the measure in June, and final approval is likely to be given in July. The EU Parliament also endorsed the final agreement with EU member states on the Digital Markets Act that will impose strict conditions on Big Tech.
Over in the U.K., financial and payment regulators got new powers to fight scams and fraud.
Crypto Still on Top of the Agenda
After a previously volatile week for stablecoins and cryptocurrencies, this week began with a fresh call from EU regulators to look into the space and boost alternatives to private digital money, namely, a digital euro.
Two top officials of central banks Monday (May 16) criticized crypto assets and the disruption these could bring to the international financial system if they are not regulated. First, Bank of France Governor Francois Villeroy de Galhau told a conference in Paris that more regulation is needed, and crypto assets should be interoperable in a consistent and appropriate manner across jurisdictions.
The second official to discuss this issue was Fabio Panetta, member of the executive board of the European Central Bank (ECB). Panetta has previously warned of the risks associated with crypto assets, and during his speech Monday morning in Dublin, he also warned that stablecoins are vulnerable to runs.
Financial leaders from the Group of Seven (G-7) Thursday (May 19) called for the Financial Stability Board (FSB) to develop “consistent and comprehensive” cryptocurrency regulation. The leaders cited the recent collapse of the Terra stablecoin and the ensuing chaos in the crypto world that followed.
Jon Cunliffe, Bank of England deputy governor, said investors in crypto should expect harder times. That will come as central banks raise interest rates, which are making it so safer assets are better bets. When asked at a Wall Street Journal conference if rising interest rates would add pressure on crypto, Cunliffe said there would likely be a “move out of risky assets” as the process continues.
Lawmakers, Regulators to Pass New Rules to Protect Consumers
EU lawmakers discussed Tuesday (May 17) the proposed amendments to the Consumer Credit Directive (CCD), which will be subject to a vote in committee in June with a view to getting final approval in plenary session before the summer break.
The existing CCD is from 2008, and although it introduced a number of benefits for consumers, it doesn’t include many new lending initiatives broadly used by consumers such as BNPL, payday loans or short-term overdraft facilities.
The commission’s proposal aims to address these technological developments by expanding its scope, introducing pricing rules for some credits, clarifying information requirements and revising creditworthiness assessments.
The U.K. Payment System Regulator (PSR) is continuing its fight against authorized push payment (APP) fraud. One of the actions taken by the regulator was to publish a new rule in February 2022 that paved the way for more banks and building societies to adopt Confirmation of Payee (CoP), the bank account name checking services.
The plan started in 2020 with the U.K.’s six largest banking groups, but the new rule in 2022 expanded the scope of the plan, and by May 31, the first phase will be closed. In the second phase, which starts June 1, all payment service providers (PSP) will need to make sure that the CoP service is available.
The U.K. Financial Conduct Authority (FCA) announced Thursday that it will use new powers to more swiftly cancel or change which regulated activities firms are permitted to do. The regulator will be able to cancel any permission given to a regulated entity, or change it, 28 days after the first warning if the firm has not taken appropriate action. In essence, businesses will be required to prove they are carrying out the regulated activity they are permitted to or face losing this permission.
Big Tech Has a Quieter Week
EU Parliament Endorses Agreement on Digital Market Act
The EU Parliament’s Internal Market Committee endorsed Tuesday the provisionally reached agreement with EU governments on the Digital Markets Act (DMA) with 43 votes in favor, one against and one abstention, according to a press release.
A provisional agreement on a sister proposal to regulate online platforms, the Digital Services Act, was reached on April 23, according to a separate press release. Both proposals are expected to be put up for a final vote in Parliament in July before they are formally adopted by the council and published in the EU Official Journal. The DMA regulation will enter into force 20 days following the publication, and the provisions will start to apply six months thereafter.
German financial watchdog BaFin has ordered Deutsche Bank to clarify how its staff uses private messages on WhatsApp for business purposes, part of a worldwide effort to curb the practice of mixing business with personal lives. BaFin wants to ensure Deutsche Bank officials are in compliance with banking rules. The request comes at a time when Deutsche Bank CEO Christian Sewing has spent billions of dollars trying to fix the bank’s controls and improve relations with supervisors.