- "Crypto poses significant challenges to EU financial regulation."
"We have identified that crypto often evades regulation due to the lack of transparency and anonymity of users, uncertain scope of EU financial regulation, testing of the boundaries of exemptive concepts, reverse solicitation, and decentralization and use of smart contracts and DAOs instead of formal legal entities, as procedural and legal reference points."
- "MiCA and TFR partly address these issues, as does the existing corpus of EU financial regulation."
- "Where a central intermediary is involved in providing crypto services, MiCA provides a bespoke set of rules that could address the most important risks and challenges. Yet, much depends on the implementation."
- "Core aspect in this regard is the definitional matter, which is linked to the delineation of various types of EU financial regulation and providing details on crucial concepts, such as custody, client solicitation and so on."
- "Shortcomings need to be addressed in the field of bespoke bankruptcy legislation, NFTs, private law, and particularly with the recognition of property rights, negotiability, and the need to establish clear rules on court jurisdiction and applicable law."
"Yet MiCA and TFR struggle with platforms that claim to be fully decentralized but in most cases are not, that we find often in crypto today. We have made bespoke proposals to address these matters by assigning, for licensing purposes, entity status to DAOs and restrict the backdoor to argue that a DAO would only serve its members."
- "Principally, we recommend addressing the cross-border issue with a cross-sectoral EU regulation on cross-border solicitation in financial services, a centralized authority of the European Supervisory Authorities (ESAs) to inquire into the EU user base and make this information available to the National Competent Authorities (NCAs), as well as RegTech, by virtue of a Euro Wallet."
When it comes to explicit mentions of Bitcoin, the 'researchers' wrote:
- "As to sustainability, we argue that the use of energy by certain blockchains (particularly the old Bitcoin blockchain) is idiosyncratic to crypto and now dated. Modern blockchain technologies are much more energy efficient. Subjecting crypto to financial regulation may further increase energy efficiency."
"While these upgrades [proof-of-stake] clearly show the potential of technological innovation, the absence of similar upgrades to the Bitcoin blockchain are deeply regrettable. One reason for the absence of such upgrades is Bitcoin’s absence of a centralized governance mechanism, which could design and implement them."
- "Deal with reverse solicitation in a cross-sectoral harmonized manner in a Cross-border Solicitation of Financial Services Regulation by expanding the rules of the Cross-border Distribution of Funds Directive."
- "Empower the ESAs to inquire into cases where third-country firms and platforms rely on reverse solicitation, into the number of EU users and their volume, and into the methods used for solicitation (if any), on behalf of NCAs, paired with robust sanctions in case of non-cooperation and an obligation to forward these data to the NCAs."
- "Adding a broad default rule according to which crypto-assets are, by way of default, transferable securities unless exempted (and requalified) by NCAs."
- "Assigning, from a regulatory perspective, an entity status to Decentralized Autonomous Organizations (DAOs), with a requirement to appoint a representative inside the EU as a precondition for serving EU users."
- "Adopting bespoke resolution and bankruptcy schemes for decentralized platforms (e.g. which could form part of the Bank Recovery and Resolution Directive (BRRD) or a new section of MiCA)."
- "Further harmonizing international private law (i.e. by endorsing the Unidroit approach or furthering a Hague Convention in relation to crypto-assets, or agreeing on property rights assigned to crypto assets at an EU level) and ensuring legal certainty on court jurisdictions and choice of law by adding crypto-assets to the Rome II and Brussels Regulations (e.g. as part of Art 6 IV Rome II Regulation)."
- "Expanding existing supervisory networks to crypto-assets; for example, crypto-assets could be defined in the IOSCO frameworks as one case where the Multilateral Memorandum of Understanding (MMOU) applies."
- "Adding a section on NFTs to MiCA that deals with the additional operational and financial risk of tokenization and DLT-based asset transfer by NFT-CASPs."
- "Mandating the new EU AML authority to share with ESAs and NCAs data on client origins of entities reporting under TFR and AMLD, to further the effective enforcing of EU financial regulation."
- "Developing a “Euro Wallet” under the eIDAS Framework with embedded compliance as to AML/KYC, licensing, and client solicitation requirements, which allows only compliant (i.e. licensed and supervised actors that pursue AML/KYC checks) to transact with EU clients."
- "Such a Euro Wallet may also provide opportunities to embed sustainability disclosures and provide the foundational infrastructure for the Digital Euro at a later point in time."