Cryptocurrencies, flagship of the EU supervisory authorities: “Immediately the rules”

Consob, Eba, Esma and Eiopa analyze the scenario of the risks associated with the use of virtual currencies: "Investments are still highly risky. They are not for everyone "

18 Mar 2022

Domenico Aliperto

The European Supervisory Authorities light a beacon on the world of crypto-assets warning consumers about the risks they can run, starting with huge losses of money and scams. "Numerous crypto-assets are highly risky and speculative" and "are not suitable for most retail consumers as an investment or means of payment or exchange", warn in unison Eba (European Banking Authority), Esma (European Banking Authority). financial instruments and markets) and Eiopa (European Insurance and Occupational Pensions Authority). A warning shared by Consob, which however points out: “it is not enough to send out alarm cries but rules are needed”.

The Commissioner of the Italian Authority, Paolo Ciocca, speaking at the event organized by Ansa and entitled "Fintech and savings, the new frontier of banks and insurance" explained that "at present these crypto-assets are not easily readable and are not for everyone: we need to understand where to put the money ”, Ciocca said. “At this stage these are highly risky investments because you can lose everything. And they're highly fluid so they're not for everyone. Then we must be careful of fraudulent schemes ".

Alongside him, also the general manager of ABI, Giovanni Sabatini, highlighted the need for "uniform" regulation, while, on the insurance front, IVASS aims to implement the 'mystery shopping' activity as soon as possible ( incognito purchases) to identify incorrect sales practices and possible scams.

Index of topics

• Ad hoc regulation is needed

• The risks associated with cryptocurrencies

Ad hoc regulation is needed

The need for regulation and supervision is made even more urgent by the war in Ukraine: "it is necessary to shorten the time for the entry into force of EU rules", because the world of crypto "cannot become the tool to circumvent sanctions" , Ciocca warned, pointing out that without rules “the final saver will always pay the price”.

Therefore, the regulatory framework on Fintech coming from the European Commission is welcome, marking "a turning point" for digital finance. The Brussels effort, however, must be integrated "as soon as possible" with a regulatory intervention at the national level, which defines the so-called last mile. This means developing national rules which are not affected by European legislation.

The director general of ABI, Giovanni Sabatini, also highlighted the urgency of regulation, explaining that banks are responding "with great awareness" to technological changes. Information technology represents "an important component in the investments of banks with over 5 billion euros at the sector level", and "92% of Italian institutes hypothesize to increase investments in technology", explained Sabatini, also pointing out the cooperation ever closer with fintechs. "The real problem is the big techs, which have enormous financial resources and masses of customers and take advantage of the advantages of better taxation". Thus, the need to have “the same rules and methods of supervision becomes increasingly evident, to avoid that, in the face of a highly regulated sector, activities move to a more opaque and less protected sector”.

On the insurance front, IVASS has instead published the application regulation of 'mystery shopping' for the consultation phase, as announced by the Secretary General of the Supervisory Institute, Stefano De Polis.

During the debate dedicated to the new frontier of financial markets, the Head of Primary Markets of Borsa Italiana, Barbara Lunghi, highlighted the growth of Fintech companies in Italy, which in Piazza Affari have reached an aggregate capitalization of 27 billion euros. For the banking as a service director of Banca Sella, Andrea Tessera, the synergy with Fintech is fundamental: the bank must be able to have innovative solutions, especially for the purposes of user experience ". The final consumer, in fact, said, "he is used to shopping experiences that evolve over time, today more than ever". So, "when offering financial services, you shouldn't be too far from the kind of more innovative experiences users are used to".

Along the same lines, the CEO of the Helvetia Group, Roberto Lecciso, who argued that contamination with other worlds is crucial for innovating the insurance sector: the main obstacle is not the difficulty of using technology but the cultural one ", he affirmed. To overcome these obstacles “the contamination ”with other sectors becomes fundamental. Therefore, it is necessary that the insurance sector, but not only, "opens up to new worlds, introducing skills outside the classic insurance perimeter"

The risks associated with cryptocurrencies

"Consumers should be alert to the risks of misleading advertising, including through social media and influencers, and be especially wary of promised fast or high returns, especially those that seem too tempting to be true," the document reads again. spread by Eba, Esma and Eiopa. "Furthermore, consumers should be aware of the lack of recourse or protection available to them, as crypto-assets, and related products and services, generally do not fall under the existing protection under current EU financial services rules." Among the main risks, the authorities report: the loss of all the invested capital; extreme price movements, which can fall and rise rapidly in a short period of time; misleading advertising; fraud and scams, as there are numerous fake crypto-assets; absence of protection and compensation if the investment goes badly. Cases of market manipulation, lack of price transparency and poor liquidity are also reported, alongside the complexity of the products, sometimes with characteristics that can increase the extent of losses in the event of unfavorable price trends.

There are also technology-related risks, as "several issuers and service providers, including crypto-asset exchanges, have suffered from cyber attacks and severe operational problems." As a result, "many consumers have lost their crypto assets or suffered losses." The most important crypto-assets to date include bitcoin and ether, which together account for around 60% of the total market capitalization of these assets. Finally, there is a sustainability issue, which consumers should keep in mind since the energy consumption of some crypto-assets is high, for example it is linked to mining and validation processes.

COMMENT. Remember that the block-chain system is a system of false democracy. There are equal conditions between the nodes, but it is like arguing that the Knights Templar were democratic because they shared food and property. Now mining is reserved for a few supercomputer owners. The common citizen who buys cryptocurrencies has infinite possibilities of being scammed, from the Ponzi method to the theft of badly invested money. Combining an anarchist system with a state system is impossible. This is demonstrated by Meta (Facebook) who has given up on launching its cryptocurrency. So we hope that the world will realize the validity of the proposed exhibition of digital currency that respects the canons of the CBDC. We comply with all the most restrictive rules established by the supervisory authority.


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