The European Association of CCP Clearing Houses (EACH) has responded to the European Commission Public Consultation “On an EU framework for markets in crypto-assets”. The entity underlined the need for a single EU classification of digital assets, the importance of CCP’s activities, and the necessity of a gradual regulatory approach.
EACH welcomes the technology and the potential to rethink many of its processes and structures, in order to facilitate clearing and settlement processes. The response found, however, the European Union must address the following:
“Need for a single EU classification of digital assets – A clear and distinct categorization of digital-assets between security, payment, utility, and hybrid-asset is deemed by EACH of critical importance to determine if a given digital-asset falls under an existing EU regulative framework and to align the existing regulation. Importance of CCPs’ activities – Although EACH Members recognize the potential positive impact that new technologies such as DLT may have on the CCP business and on financial markets, and are involved in initiatives to encourage the development of such technologies, we believe that the benefits of clearing transactions through a CCP will not become obsolete in the future. Certain functions of the CCP, including multilateral netting as well as the performance of risk, collateral, and default management processes, will indeed remain unique features of central clearing even if the industry moves to a distributed ledger. The necessity of a gradual regulatory approach – EACH believes that a gradual regulatory approach in the areas of trading, post-trading and asset management concerning security tokens would be not only appropriate but also necessary not to stifle innovation and to carefully monitor DLT as well as security tokens developments at this time.”
Earlier this year, the World Federation of Exchanges commended Singapore’s approach to crypto trading following the Monetary Authority of Singapore’s (MAS) Consultation Paper on Proposed Regulatory Approach for Derivatives Contracts on Payment Tokens (crypto assets). The WFE outlined the roles of both the exchange and CCP in the trading and clearing of derivatives contracts. The response notes that established exchanges offer a venue whereby exchange-traded
and centrally cleared derivatives are subject to pre- and post-trade
standards, set by the exchange listing and the CCP clearing the
trades.
In late 2019, the WFE called the UK FCA not to ban crypto derivatives for retail investors because an outright ban, under current proposals, would envelop regulated exchanges and CCPs who operate under stringent
regulations to provide pre- and post-trade risk management standards
which are designed to foster safe and efficient markets, the WFE
stated.
