Activities of Stasys JAKELIŪNAS related to 2020/2034(INL)
Shadow reports (1)
REPORT with recommendations to the Commission on Digital Finance: emerging risks in crypto-assets - regulatory and supervisory challenges in the area of financial services, institutions and markets
Amendments (55)
Amendment 18 #
Motion for a resolution
Citation 3 e (new)
Citation 3 e (new)
– having regard to the study requested by the European Parliament's Committee on Economic and Monetary Affairs ‘Crypto-assets: Key developments, regulatory concerns and responses’ of April 2020,
Amendment 19 #
Motion for a resolution
Citation 3 f (new)
Citation 3 f (new)
– having regard to the study requested by the European Parliament's Committee on Internal Market and Consumer Protection ‘Consumer Protection Aspects of Financial Services’ of February 2014,
Amendment 24 #
Motion for a resolution
Citation 17 a (new)
Citation 17 a (new)
– having regard to the Financial Action Task Force’s ‘Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers’ of June 2019,
Amendment 33 #
Motion for a resolution
Recital B a (new)
Recital B a (new)
Amendment 47 #
Motion for a resolution
Recital G
Recital G
G. whereas digital finance has a strong cross-border element, which goes beyond the Union level and therefore international cooperation as well as an efficient and effective Union supervision in this field is essential;
Amendment 50 #
Motion for a resolution
Recital H
Recital H
H. whereas, according to market 1a data , at the beginning ofs of June 2020, over 5,1600 crypto- assets exist globally, with a total market capitalisation exceeding USD 2560 billion,2 ; _________________ 65% of which is made up of Bitcoin alone; _________________ 1a https://coinmarketcap.com 2 https://www.europarl.europa.eu/RegData/et udes/STUD/2020/648779/IPOL_STU(202 0)648779_EN.pdf
Amendment 51 #
Motion for a resolution
Recital H a (new)
Recital H a (new)
Ha. whereas, according to market data, stablecoins have reached a total market capitalisation of EUR 10 billion in June 2020 from 1.5 billion in January 2018 and, despite their still limited reach compared to other cryptocurrencies, have the potential to rapidly reach a global scale and a wide mass user base, especially if adopted by big tech companies exploiting their networks;
Amendment 52 #
Motion for a resolution
Recital H b (new)
Recital H b (new)
Amendment 55 #
Motion for a resolution
Recital I
Recital I
I. whereas experts of the European Central Bank (ECB) noted in their publication of 20193 , that even though crypto-assets are highly speculative, they do not represent an immediate threat to financial stability due to the current limited size of crypto-asset networks, whereas such state of play is subject to change in case of large scale adoption; _________________ 3 https://www.ecb.europa.eu/pub/economic- bulletin/articles/2019/html/ecb.ebart20190 5_03~c83aeaa44c.en.html#toc4
Amendment 57 #
Motion for a resolution
Recital I a (new)
Recital I a (new)
Ia. whereas, as pointed out in the EBA report, financial institutions are currently engaging in relatively limited crypto-assets related activities, but their interest is likely to grow particularly in the context of the increasing use of DLT- based solutions; whereas such activities include holding or gaining exposure to crypto-assets, underwriting ICOs, or offering services in relation to crypto- assets such as providing custody wallet or exchanges; whereas the current prudential rules are not well suited to capturing the high volatility and high risks of crypto-assets;
Amendment 64 #
Motion for a resolution
Recital I b (new)
Recital I b (new)
Ib. whereas initial coin offerings (ICOs) could provide an alternative source of funding for innovative businesses and start-ups at the early phase of their developments, but they also expose investors to high risks of losses due to their highly speculative nature and vulnerability to frauds; whereas the BIS Annual Economic Report 2018 found that at least 22,5% of ICOs have turned out to be fraudulent Ponzi schemes;
Amendment 66 #
Motion for a resolution
Recital I c (new)
Recital I c (new)
Ic. whereas crypto-assets have the potential to reduce transactions costs in a safe manner in an increasingly digitally surveyed world if subject to a stringent, fit for purpose and risk-based regulatory regime;
Amendment 70 #
Motion for a resolution
Recital J a (new)
Recital J a (new)
Ja. whereas the Wirecard scandal highlights the high risks for consumer investor protection and financial fraud posed by using sandboxes and by light oversight and regulation in order to foster innovation in the area of FinTech;
Amendment 112 #
Motion for a resolution
Paragraph 1
Paragraph 1
1. Welcomes the commitment of the Commission to finalising an Action Plan on FinTech by Q3 of 2020; considers that a Commission proposal on crypto-assets, as well as a cross-sectoral financial services act on operational and cyber resilience, are timely and necessary due to recent developments in the markets; requests that the Commission submits on the basis of Article 114 respective legislative proposal following the recommendations set out in the Annex hereto;
Amendment 118 #
Motion for a resolution
Paragraph 2
Paragraph 2
2. Considers that FinTech will be integral to the success of the Capital Markets Union (CMU), subject to an appropriate regulatory framework and consumer protection provisions, and encourages the Commission to consider how to harness the benefits of FinTech in driving forward capital market integration in the Union;
Amendment 128 #
Motion for a resolution
Paragraph 3
Paragraph 3
3. Highlights the importance for the Commission to closely align its work with international fora and regulatory bodies in developing international standards given the cross-jurisdictional nature of digital finance, without prejudice to the EU ability to adopt stronger regulatory and supervisory provisions;
Amendment 134 #
Motion for a resolution
Paragraph 4
Paragraph 4
4. Calls on the Commission to deploy a proportionate, risk-based, cross-sectorial and holistic approach to its work on FinTech;
Amendment 143 #
Motion for a resolution
Paragraph 5
Paragraph 5
5. Calls on the Commission to act as first mover in order to create a favourablesustainable and lawful environment for European FinTech hubs and firms to scale up;
Amendment 151 #
Motion for a resolution
Paragraph 6 – point a
Paragraph 6 – point a
a. the same activities and services and their associated similar risks should be subject to the same rules;
Amendment 162 #
Motion for a resolution
Paragraph 7
Paragraph 7
7. Points out that the Union level measures should not stifle opportunities for businesses to grow andgislation should be adapted and updated to take account of the rapid developments in the expanding markets of crypto-assets and ICOs; emphasises that the current legal uncertainty creates risks to consumer and investor protection and prevents real opportunities for businesses to grow and a sustainable ecosystem for digital finance to develop within the Union;
Amendment 177 #
Motion for a resolution
Paragraph 8
Paragraph 8
8. Highlights the importance of the triangle of trulest, identity verification and data in order to ensure that operators, consumers and supervisors are able to have confidence in digital finance’ activities are subject to appropriate safeguards and restrictions, consumers are adequately protected and aware of risks and supervisors are able to monitor developments and take appropriate actions in the area of digital finance, while preserving the integrity of existing capital markets;
Amendment 181 #
Motion for a resolution
Paragraph 8 a (new)
Paragraph 8 a (new)
8a. Points out that the financial supervisory framework across Member States is currently structured on four different approaches: institutional, functional, and integrated and Twin Peaks, which results in major fragmentation and lack of convergence in the EU financial regulatory and supervisory architecture; in order to address this issue and reduce regulatory and supervisory arbitrage opportunities, calls on the Commission to launch a new consultation on the review of the European system of financial supervision with a main goal to create a Twin Peaks- based, efficient and harmonised supervisory framework;
Amendment 195 #
Motion for a resolution
Paragraph 9
Paragraph 9
9. Considers that developing a comprehensive pan- European taxonomy for crypto-assets is desirable as aa necessary step towards fostering a EU common understanding, facilitating collaborationestablishing an adequate regulatory regime, facilitating a coordinated approach across jurisdictions and providing greater legal and regulatory certainty for market participants engaged in cross border activity; recommends taking into account the importance of international cooperation and global initiatives as regards frameworks for crypto-assets, including stablecoins, bearing in mind in particular their borderless nature; cautions, however, that developing an open-ended taxonomy template may be more appropriate for this evolving market segment and the potential systemic risks for financial stability and fair competition; considers, however, that developing an open-ended taxonomy template at EU level taking account of this evolving market segment should be a priority and serve as a basis for appropriate legislative and regulatory actions;
Amendment 203 #
Motion for a resolution
Paragraph 9 a (new)
Paragraph 9 a (new)
9a. Notes that in the absence of a common EU regulatory approach for crypto-assets, Member States have already started adopting unilateral legislative and supervisory actions and face increasing pressure to act due to consumer protection concerns; points out that divergent interpretations and an uncoordinated approach across Member States can lead to market fragmentation, increase legal uncertainty, undermine the level playing field and provide opportunities for regulatory arbitrage;
Amendment 209 #
Motion for a resolution
Paragraph 10
Paragraph 10
10. Believes, therefore, that any further categorisation should be balancedcomprehensive and flexible in order to givebe adaptable to evolving business models and cyber risks, while giving space for innovation in the sector whiland at the same time ensuring that risks can be identified and addressed at an early stage;
Amendment 219 #
Motion for a resolution
Paragraph 11
Paragraph 11
11. Further stresses that clear guidanceity on the applicable regulatory and prudential processes is needed in order to provide regulatory certainty regarding crypto- and an adequate prudential treatment regarding high- risk crypto-assets, taking account of their high volatility and speculative nature, as well as to ensure stronger supervisory convergence in this area; underlines in particular the need for a targeted review of the CRR/CRD framework and a common approach to the accounting treatment of crypto-assets;
Amendment 223 #
11a. Considers that until a EU taxonomy is available, regulated and licensed financial institutions should be subject to a temporary ban of crypto- assets related activities in consideration of the high risks to consumer and investors protection, financial stability, and market integrity and reputation, with the exception of small-scale or prototype activities subject to the approval of competent authorities; points out that once such taxonomy is established in EU law, such institutions should carry out activities related to high-risk crypto-assets only subject to strong safeguards and tight limits, based on an assessment of the potential risk of the activities under the most conservative assumptions;
Amendment 225 #
Motion for a resolution
Paragraph 11 b (new)
Paragraph 11 b (new)
11b. Considers that all agents and participants entering into transactions above a 'de minimis' threshold in crypto- assets related activities outside of the scope of the regulated and licensed financial institutions should be subject to the standards of the existing regulatory framework including AML/CFT, KYC, MiFID, Market Abuse Regulation, PSD, Short Selling Regulation, Prospectus Regulation, Central Securities Depositories Regulation, EMIR and UCITS, as applicable;
Amendment 226 #
Motion for a resolution
Paragraph 11 c (new)
Paragraph 11 c (new)
11c. Stresses that risks related to holdings and exposures to crypto-assets should be fully integrated in the supervisory review and evaluation process (SREP) once the taxonomy is available; highlights in this regard the need for adequate and standardised disclosure requirements of any material exposures or services related to crypto-assets;
Amendment 227 #
Motion for a resolution
Paragraph 12
Paragraph 12
12. Points out that applying existing regulations to previously unregulated crypto-assets will be necessary, as will creating bespoke and stringent regulatory regimes for, including evolving crypto-asset activities, such as initial coin offerings, so as to avoid unwanted legitimisation and ensure adequate consumer protection and market integrity; stresses in particular the need to establish stringent rules regarding information to potential clients, which should be clear and not misleading, as well as suitability assessments requirements;
Amendment 240 #
Motion for a resolution
Paragraph 13
Paragraph 13
13. Highlights that a common Union framework on crypto-assets should help increase consumer and investor protection, enhanfully enforce know your customer (KYC) obligations and oversight of the underlying technology;
Amendment 242 #
Motion for a resolution
Paragraph 13 a (new)
Paragraph 13 a (new)
13a. Underlines that existing gaps in the anti-money laundering (AML) framework for crypto-assets such as in the application of the KYC principle, lead to an uneven playing field between different types of financial activity; considers that AML/CTF provisions for providers of services related to crypto-assets should be enforced also for foreign providers offering their services in the Union; highlights that a comprehensive definition of ‘virtual assets’ is needed to better reflect the nature and function of crypto- assets for the purpose of AML/CTF; points out that the definition of terrorist financing shall also be updated to ensure that crypto-assets are adequately covered;
Amendment 246 #
Motion for a resolution
Paragraph 13 b (new)
Paragraph 13 b (new)
13b. Calls further on the Commission to expand the scope of obliged entities under the AML/CTF framework, in line with the recommendations of the Financial Action Task Force (FATF) and ESMA, to ensure that all activities involving crypto-assets, with regards to providers of virtual-to-virtual exchanges, other categories of wallet providers and initial coin offerings, are subject to the same AML/CTF obligations;
Amendment 249 #
Motion for a resolution
Paragraph 13 c (new)
Paragraph 13 c (new)
13c. Considers that Virtual Assets Service Providers (VASP) operating in the EU should be subject to mandatory registration or licensing requirements with the competent authorities before conducting business within the EU, including the obligation to appoint a resident executive director and have substantive management presence in the jurisdiction of registration; underlines further that, in line with FATF Guidelines, the VASP’s shall be required to seek prior approval by the competent authorities for substantive changes in shareholders, business operations and structures, to prevent criminals from owning or holding a significant controlling interest or management function in a VASP and ensure the fitness and properness of directors, managers and shareholders;
Amendment 253 #
Motion for a resolution
Paragraph 13 d (new)
Paragraph 13 d (new)
13d. Reiterates the need to establish a European Financial Intelligence Unit (FIU) to effectively address the AML/CTF risks arising from cross-border activities and new technologies, in particular those posed by crypto-assets;
Amendment 265 #
Motion for a resolution
Paragraph 14
Paragraph 14
14. Points out that with the increasing digitalisation of financial services, as well as outsourcing to external IT solution or maintenance providers, such as cloud providers, the exposure of financial institutions and markets to disruption caused by internal failures or external attacks is becoming more pronounced and thereby that operational risks need to be thoroughly assessed in such evolving landscape to take into account and stress test plausible, but extreme scenarios;
Amendment 274 #
Motion for a resolution
Paragraph 15
Paragraph 15
15. Calls on the Commission to propose legislative changes in the area of ICT and cyber security requirements for the Union financial sector, taking into account international standards, in order to address any inconsistencies, gaps and loopholes that are found to exist in relevant law;
Amendment 283 #
da. data integrity and security;
Amendment 293 #
Motion for a resolution
Paragraph 17 b (new)
Paragraph 17 b (new)
17b. Stresses the need, in order to enhance operational resilience and market integrity, for establishing clear requirements for trading platforms, as regards in particular, depending on the nature and size, robust governance arrangements, including risk-based capital requirements and adequate processes and controls against hacking or theft, due diligence requirements, assets segregation, adequate complaints handling and redress procedures to deter market abuses, as well as screening processes against the risk of fraud and manipulation;
Amendment 310 #
Motion for a resolution
Paragraph 20 a (new)
Paragraph 20 a (new)
20a. Calls on the Commission to actively promote open-source software and their role in cyber resilience, especially for their inherently high levels of transparency;
Amendment 311 #
Motion for a resolution
Paragraph 20 b (new)
Paragraph 20 b (new)
20b. Calls on the Commission to actively promote use of open source hardware and to actively work in promoting European autonomy in producing software with transparent features; underlines that European reliance on third party hardware manufacturers is a long term security liability, especially in connection with digital finance;
Amendment 325 #
Motion for a resolution
Paragraph 23
Paragraph 23
23. Believes that the lack of accessible data and information regarding FinTech and crypto-assets related activities can be a detriment to growthconsumer protection, market integrity and financial stability as well as to the fight against money laundering and terrorism financing, tax evasion and tax avoidance; advocates for increased transparency and enhanced reporting of FinTechrequirements of FinTech and crypto-assets activity so as to reduce asymmetries and risks; further calls for the adoption of specific rules on market transparency and integrity;
Amendment 335 #
Motion for a resolution
Paragraph 24 a (new)
Paragraph 24 a (new)
24a. Calls for transparency of algorithms used by the financial sector, as appropriate, and supervisory disclosure of these;
Amendment 336 #
Motion for a resolution
Paragraph 24 b (new)
Paragraph 24 b (new)
24b. Economic, environmental and social implications Highlights the challenges and risks for financial stability and monetary transmission posed by the emergence of stablecoins with potential for global reach and mass adoption, including shifting the control of monetary policy from central banks to private companies without any accountability; welcomes in this regard the commitment of the Commission and the Council, in line with the actions taken at international level, to identify and address the legal, regulatory and oversight challenges and potential systemic risks posed by global stablecoins and other similar arrangements, before such projects can commence their operations in the EU;
Amendment 337 #
Motion for a resolution
Paragraph 24 c (new)
Paragraph 24 c (new)
24c. Economic, environmental and social implications Is concerned about the high environmental impact of crypto-mining based on proof of work protocols, such as Bitcoin; points out that, according to a benchmarking study presented by the Cambridge Centre for Alternative Finance, the energy consumption used by Bitcoin equals that of the whole country of Switzerland; stresses the need for new solutions aimed at mitigating the ecological footprint of mainstream crypto- assets and to ensure the shift towards energy efficient solutions, including the reuse of heat generated for other uses;
Amendment 338 #
Motion for a resolution
Paragraph 24 d (new)
Paragraph 24 d (new)
24d. Economic, environmental and social implications Points out that, despite the original promise of leading to decentralisation, democratisation and reducing economic inequalities, crypto-assets have been, on the contrary, associated with high levels of wealth concentration, while most crypto-assets trading occurs on centralized exchanges vulnerable to hacking and frauds;
Amendment 339 #
Motion for a resolution
Paragraph 24 e (new)
Paragraph 24 e (new)
24e. Economic, environmental and social implications Underlines the potential benefits of introducing a Euro virtual currency to provide cheaper, faster and more secure transactions to European citizens, while ensuring that competent authorities are equipped with the adequate tools to prevent illegal activities; invites the ECB to consider to undertake a comprehensive impact assessment regarding the possibility of introducing a Euro virtual currency;
Amendment 345 #
Motion for a resolution
Annex I – part A – point 2
Annex I – part A – point 2
2. To ensure that digital finance can continue to becreate a framework that allows digital finance is an innovative driver of growth and jobs across the single market in a safe and regulated environment with high standards for consumer/investor protection and market integrity;
Amendment 347 #
Motion for a resolution
Annex I – part A – point 2 a (new)
Annex I – part A – point 2 a (new)
2a. To ensure that activities from the field of digital finance that are economically similar to regulated activities under the current legislative framework are held to the same standards, thereby minimising the potential for regulatory arbitrage and facilitating competition on a level playing field;
Amendment 349 #
Motion for a resolution
Annex I – part A – point 3
Annex I – part A – point 3
3. To foster a common understanding of the key issues concerning digital finance and encouragsure the harmonisation of relevant provisions, which will lead to enhanced cross border activity;
Amendment 351 #
Motion for a resolution
Annex I – part A – point 4
Annex I – part A – point 4
4. To increase data sharing, data integrity and security in accordance with Union principles in order to stimulate innovationenhance consumer protection and market integrity . The aim should be to facilitate access to public data across the Union, while ensuring compliance with data protection and data security standards. This would not only benefit digital finance companies, but would also be to the benefit of a number of other Union policy areas and increase market transparency;
Amendment 353 #
Motion for a resolution
Annex I – part B – point -1 (new)
Annex I – part B – point -1 (new)
-1. To ensure that until a EU taxonomy is available, regulated and licensed financial institutions should be subject to a temporary ban of crypto- assets related activities with the exception of small scale or prototype activities subject to approval by competent authorities, in consideration of the high risks to consumer and investors protection, financial stability, and market integrity and reputation; points out that once such taxonomy is established in EU law, such institutions should carry out activities related to high-risk crypto-assets only subject to strong safeguards and tight limits, based on an assessment of the potential risk of the activities under the most conservative assumptions. Meanwhile, all agents and participants entering into transactions above a 'de minimis' threshold in crypto-assets related activities outside of the scope of the regulated and licensed financial institutions should be subject to the standards of the existing regulatory framework including AML/CFT, KYC, PSD2, MiFID, Market Abuse Regulation, Short Selling Regulation, Prospectus Regulation, Central Securities Depositories Regulation, EMIR and UCITS, as applicable;
Amendment 354 #
Motion for a resolution
Annex I – part B – point 1
Annex I – part B – point 1
1. To put forward a legislative proposal for Crypto-Assets, which provides legal certainty for the treatment of Crypto- Assets while ensuring high standards of consumer and investor protection, market integrity and financial stability. Such a framework should consider a comprehensive and an open taxonomy, and aim to legislate according to the principle of the same rules applying according to the same activity and risks, both among crypto-assets as well as vis-à- vis traditional financial services. Moreover, such framework should: (a) be based on the principle of proportionality and of an adequate regulation of providers based on principles that are already in use in financial services; (b) ensure that crypto-assets that are economically similar to traditional securities, and all involved agents, are subject to existing securities markets regulations, in particular MiFID, Short Selling Regulation, Market Abuse Regulation and Prospectus Regulation, as applicable; (c) ensure that crypto-assets that are economically equivalent to traditional collective investment undertakings, and all involved agents, are subject to existing funds regulation, in particular UCITS, AIFMD and MFF, as applicable; (d) ensure that crypto-assets that are economically equivalent to traditional e- money, and all involved agents, are subject to existing payments regulation, in particular the E-Money Directive and PSD, as applicable; (e) ensure that stablecoins meet at least the standards of the E-Money Directive, in particular with regards to their redeemability at par, complemented by additional requirements to account for their potential systemic relevance; (f) consider any crypto-assets that do not belong to one of the categories above as high-risk crypto-assets; (g) ensure the adoption of specific rules on market transparency and integrity at least equivalent to those of MIFID for issuers or sponsors of crypto-assets; (h) ensure all crypto-assets service providers, including trading platforms and ICOs, are subject to AML/CTF obligations, as regards in particular conducting customer due diligence and KYC, record keeping and reporting of suspicious transactions to the competent authorities and FIUs. Crypto-assets providers shall not use or tolerate any techniques (such as cryptocurrency tumblers or mixers) that would undermine their ability to meet their AML/CFT requirements; (i) ensure that Virtual Assets Service Providers (VASP) operating in the EU are subject to mandatory registration or licensing requirements with the competent authorities before conducting business within the EU, including the obligation to appoint a resident executive director and have substantive management presence in the jurisdiction of registration. The VASP shall be required to seek prior approval by the competent authorities for substantive changes in shareholders, business operations and structures, to prevent criminals from owning or holding a significant controlling interest or management function in a VASP and ensure the fitness and properness of directors, managers and shareholders; (j) appoint a single European supervisor for oversight and registration of all crypto-assets related activities in the European Union, based on a common rulebook; (k) include legal provisions and mechanisms to ensure that the regulatory standards for crypto-assets related activities, in particular regarding consumer protection and AML/CFT, are also enforced when such activities or services are provided or operated from outside the European Union;
Amendment 358 #
Motion for a resolution
Annex I – part B – point 1 a (new)
Annex I – part B – point 1 a (new)
1a. To strengthen the application of the AML/CTF framework to crypto-assets and close the existing loopholes, in particular: (a) adopt a comprehensive definition of crypto-assets; (b) update the definition of terrorist financing to also include assets or property within the scope; (c) incorporate under AML/CTF obligations other categories of crypto- assets service providers, namely providers of virtual-to-virtual exchanges, other categories of wallet and ICOs;
Amendment 360 #
Motion for a resolution
Annex I – part B – point 2
Annex I – part B – point 2
2. To make a legislative proposal on cyber resilience, which ensures consistent standards of ICT security across the Union financial sector. Such a framework should be future-oriented and focus on modernising the current rules applicable concerning cyber resilience, while also closing any regulatory loopholes and gaps, which may put businesses, investors and consumers at risk; crypto-assets trading platforms should be subject to robust governance arrangements, including risk- based requirements and adequate processes and controls against hacking or theft, due diligence requirements, assets segregation, adequate complaints handling and redress procedures to deter market abuses, as well as screening processes against the risk of fraud and manipulation;