Crypto Accountability: EU Regulators Dive Into Banking Sector’s Digital Asset Exposure

The European Banking Authority (EBA), European Systemic Risk Board (ESRB), and Financial Stability Board (FSB) have joined forces to embark on an extensive inquiry. This investigation aims to assess the intricate relationships between conventional banks and non-bank financial institutions (NBFIs) within the European Union.

Moreover, the scope of this analysis spans various sectors, including hedge funds, private equity, and cryptocurrency platforms, to comprehensively understand the dynamics of interdependence within the financial landscape of the EU.

José Manuel Campa, the chair of the EBA, announced this intention during an interview with the Financial Times on Dec 3. Campa underscores the importance of tracing the entire “underlying chain in NBFIs” to comprehend the extent of potential contagion between banking and non-banking financial institutions during stressful situations.

We are dedicated to intensifying our endeavors, recognizing the necessity for thoroughly comprehending the underlying chain within non-bank financial institutions (NBFIs).

Crypto Scrutiny: EBA’s Anti-Money Laundering Guidelines

The executive disclosed that the EBA has already evaluated the banks’ balance sheet exposures to non-banks, encompassing loans. He contends that non-bank financial institutions (NBFIs) represent an “obscure sector” characterized by a “non-homogeneous” quality of available data.

Per the Financial Stability Board (FSB) estimation, the collective value of assets held by non-bank financial institutions (NBFIs) is approximately $218 trillion, constituting about 46% of the total global assets. In contrast, conventional banks have around $183 trillion in assets.

In Nov 2023, the European Banking Authority (EBA) established innovative industry guidelines to combat money laundering and terrorist financing (AML/CFT) within the cryptocurrency sector. The EBA recommended integrating AML/CFT criteria for payment and crypto asset service providers (CASPs). Additionally, it suggested mandating CASPs to enhance the interoperability of their protocols, facilitating the seamless and interoperable transmission of information.

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