EU Investigates Crypto Asset Rules to Protect Investor Redemption Rights

EU Investigates Crypto Asset Rules to Protect Investor Redemption Rights

By Ez-XBRL Team 24 January, 2025
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24 January 2025

The European Commission has launched an investigation into whether EU rules on crypto assets adequately safeguard the redemption rights of investors in identical e-money tokens (EMTs) pegged to a single official currency.

The inquiry stems from a request by France’s banking and insurance regulator, the Autorité de contrôle prudentiel et de résolution (ACPR), which last year sought clarification from the European Banking Authority (EBA) on whether fully fungible EMTs could be issued by both EU-licensed entities and those outside the bloc not subject to EU regulations. The EBA referred the matter to the European Commission, as it involves interpreting EU law.

Under the EU’s Markets in Crypto-Assets Regulation (MiCAR), adopted in 2023, issuers of EMTs must obtain supervisory clearance and hold adequate reserves, such as bank deposits, to ensure they can meet redemption requests from investors.

The case also raises questions about cross-border issuance of EMTs. Notably, Circle, the issuer of the U.S. dollar-pegged stablecoin USDC, operates both in the EU through Circle SAS and globally via Circle LLC. The ACPR asked whether EU rules could restrict redemption requests for EU-issued EMTs to customers within the bloc.

Andrea Resti, a finance professor at Bocconi University in Milan, warned against overly broad interpretations of the rules. “The MiCA regulation already has quite a bit of flexibility built in to avoid stifling innovation. However, interpreting the rules beyond what is explicitly stated could introduce risks and undermine the effectiveness of the regulation,” Resti noted.

Meanwhile, in the United States, President Donald Trump has pledged to ease regulatory burdens on cryptocurrency companies. The U.S. Securities and Exchange Commission (SEC) recently announced a task force to draft new crypto regulations.

As crypto asset markets evolve, the EU’s efforts to clarify its regulatory framework reflect the bloc’s focus on balancing investor protection with innovation in the digital finance sector.