EU crypto proposals could drive exchanges out of business

Author: Olly Jackson | Published: 2 Nov 2018

Esma’s Securities and Markets Stakeholder Group’s (SMSG) proposed reforms to cryptocurrency regulation could result in exchanges being driven out of business, and could force secondary trading of cryptocurrencies onto a multilateral trading facility (MTF).

"This could drive smaller exchanges out of business, unless they have significant cash resources at their disposal," said Ashurst’s Bradley Rice.

The new rules would mean cryptocurrencies are indeed financial instruments and therefore subject to financial regulation such as Mifid II, the Market Abuse Regulation (MAR) and the Prospectus Regulation. It’s not yet known certain whether Esma will adopt these recommendations. Esma did not respond to IFLR’s request for comment.

While the likes of Mifid and MAR have provided significant angst for the mainstream financial sector, for a small fintech startup these regulations would be particularly inhibitive. The lack of expertise, resources and time to deal with the regulations are said to be prohibitive...