Central Bank of Ireland streamlines licensing process for cryptocurrency companies as EU prepares … (+)
The Central Bank of Ireland is strengthening its authorisation process for crypto companies as the European Union prepares to implement the Crypto Asset Markets Regulation. Deputy Governor Derville Rowland announced the development during a speech at the 8th Annual AFME European Compliance and Legal Conference on 23 September 2024.
The licensing process, which cryptocurrency businesses must go through to operate legally in Ireland, involves regulatory approval of a company’s financial stability, risk management systems and compliance with anti-money laundering regulations. Rowland said: “We are working to continually improve our authorization process,” addition, “Better risk assessment, better communication and better surveillance outcomes have been the result of this work.”
The move comes as part of Ireland’s preparations for MiCAR, a European regulatory framework for cryptoassets. MiCAR aims to establish consistent rules across all EU Member States for issuers and service providers of cryptoassets. “We are working closely with our EU peers and the ESAs to ensure the necessary coordination and coherence across Europe,” Rowland said.
Rowland highlighted the significant potential of blockchain technologies: “We can see the many areas where blockchain has tremendous potential to bring positive, even transformational, change to the way we do things. From the tokenization of investment products to improvements in post-trade infrastructure and interoperability, there are important positive stories to tell.”
The central bank aims to strike a balance between innovation and risk management. “It is important that these benefits can be realised, whilst ensuring that the risks are well understood and managed.” Rowland also highlighted the key role of regulation: “Regulation plays a crucial role in the safe, and therefore sustainable, adoption of innovation in the system.”
Concerns about implementation and compliance
Although the measure is intended to simplify procedures, some industry representatives express concerns about potential challenges during implementation. “It’s good to talk about regulation in this sector because governments are preparing for mass adoption. The problem is how these regulations will hinder development and, more importantly, deployment.” says Daniel Logvin, CEO of LedgerByte. “Compliance is a very difficult thing to achieve, especially when many systems are already in operation,” Logvin adds.
“This provides increased regulatory clarity, which will help support institutional confidence, investor confidence and consumer protection,” notes Susana Esteban, general director of FTI Consulting. However, she warns that “This adds more compliance responsibilities (and potentially costs) for crypto companies and traditional financial entities working with digital assets.”
Ireland’s potential as a cryptocurrency hub
According to an October 2023 article by Ben Strack in Blockworks, Ireland’s appeal to cryptocurrency companies has been growing for years. The Irish government launched an “Innovation Hub” in 2018, facilitating engagement between fintech companies and the Central Bank of Ireland. Coinbase opened its Dublin office in late 2018, while Gemini became Ireland’s first virtual asset service provider (VASP) in July 2022. MoonPay was granted VASP status in August 2023, and Kraken received its Electronic Money Institution Authorization in September 2023.
“We welcome the regulatory clarity and the continued improvements and refinements made by regulators to adapt regulations to protect users and markets, but also to balance the need to continue to foster innovation and growth,” says Gracy Chen, CEO of Bitget. “Ireland is certainly still at the top of the list for innovative companies looking to set up shop as a global financial centre, due to its membership and access to the European Union, as well as its favourable business environment, including its talent pool. This certainly helps to encourage cryptocurrency companies to consider Ireland more seriously as a base.”
“If Ireland combines this with tax incentives or a business-friendly environment, it could become a hub for cryptocurrency businesses, but this legislation applies EU-wide and it could have some competition for businesses,” suggests Richard Lofthouse, head of risk and data science at InFlux Technologies.
Balancing regulation and innovation in the EU
MiCAR regulates crypto-asset activities previously not covered in the EU, including their issuance, custody, administration and trading on platforms and exchanges. “This could position the EU as a leader in cryptocurrency regulation, but being a leader on rules does not always translate into market success. It is important for the EU to strike a balance between strong regulation and the opportunity to innovate to remain globally competitive,” Logvin declares.
Esteban concludes, “Regulatory certainty can be a competitive advantage. MiCAR provides regulatory guidelines that could make EU-based cryptocurrency businesses more attractive to investors and institutional partners, thereby strengthening their global credibility.”
Disclosure: All quotes in this article without a specific source citation were obtained in response to my request through a specialized service that connects journalists with expert sources. The exception is the quote from Gracy Chenwhich a public relations specialist provided to me at my request, while Derville Rowland’s quotes are taken from the text of his speech.
