Response to EC consultation on crypto-assets

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Technology, neutrality and “same business, same risks, same rules” should apply to uphold the principles of transparency, fairness, stability, investor protection and market integrity.

The creation of an EU classification of “digital-assets” should (i) define a “crypto-asset” as a “digital asset” based on cryptography and (ii) introduce a clear distinction between “crypto-assets” that represent the digitalised embodiment of a ‘traditional asset’ or act as financial instruments and “digital-assets” that do not.

FESE supports a legally binding approach, based on existing EU financial market regulations. This would provide legal certainty to reduce regulatory arbitrage, inconsistencies and market fragmentation and ensure scalability of services within the EU.

Most importantly, from a financial market integrity and investor protection perspective, a classification of “digital assets” introduces a clear differentiation between “digital assets” that act as financial instruments (i.e. “crypto-assets”) and “digital assets” that do not act as a financial instrument. It is important to clarify that where assets qualify as financial instrument they are already subject to existing rules.

A company offering a “crypto-asset”-trading platform trading financial instruments should be subject to the same requirements as “traditional” trading venues. This would allow for a safe and transparent trading environment for both investors and issuers.

The scope of existing regulation should be sufficient to extend to most potential DLT use-cases. Legislation, rules and supervisory practises should only be adapted if strictly required and conferring an undue advantage to one technology over another. Moreover, inadvertently limiting competition by unnecessarily increasing barriers to entry should be avoided.