V. Vasiliauskas: Clear ‘rules of the game’ needed for the booming crypto sector
Participating in the informal Ecofin meeting held on 7-8 September in Vienna, Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, will share Lithuania’s experience in crypto assets regulation. Discussions on the importance of regulating this sector at the EU level have been initiated by Austria, which currently holds the Presidency of the Council of the European Union.
“We were among the first countries in Europe to set clear-cut ‘rules of the game’ for all financial market participants that manage or distribute crypto assets. This allowed us gain valuable experience that has sparked the interest of other EU countries,” said Mr Vasiliauskas.
The Chairman noted that the crypto sector is constantly expanding, which means that risky financial instruments – which may bring both substantial returns and significant losses – are becoming more and more widespread. Market data indicates that in the first half of this year alone initial coin offering (ICO) projects have globally attracted triple the amount of funds than over the course of 2017. In terms of the number of ICOs initiated, Lithuania ranks among the leaders in the EU.
“The guidelines set are not intended to prohibit, stimulate or hinder the development of this sector. Their main purpose is to help financial institutions find their feet in the still rather opaque crypto domain, while also addressing the potential risks that both consumers and the domestic financial system may face,” said the governor of the central bank of Lithuania.
Given the continued expansion of the crypto segment, he stressed, the need for a uniform regulatory framework might become valid, bringing the possibility of pan-European regulation closer to reality. In his view, if policymakers are to take actions in this direction, it is of critical importance to ensure that the common regulatory standards are based on the existing national best-practices.
In October last year the Bank of Lithuania announced its official position on crypto assets, stating that supervised financial institutions must clearly disassociate themselves from activities linked to this market segment. Payment institutions and other financial market participants should not provide services related to crypto assets or participate in their distribution. Such separation is necessary in order not to create an illusion that crypto assets are regulated and safe.
The position also entails that, based on the specific ICO model, certain requirements and restrictions linked to investment-related activities might apply, for example, the Law on Securities, the Law on Crowdfunding, or laws regulating collective investment, the provision of investment services, the secondary market and capital formation of financial market participants.
In order to ensure credibility and safety of the financial system, financial market participants providing services to clients that distribute crypto assets or are linked to them in any other way must also ensure strict compliance with anti-money laundering and terrorist financing (AML/CFT) requirements.
During the informal Ecofin meeting, EU ministers of Economy and Finance will also discuss issues such as the deepening of Economic and Monetary Union and financial stability. During his visit in Austria, Mr Vasiliauskas will also attend the ‘Eurofi’ Financial Forum, taking part in a discussion on further development of the EU banking union.