Crypto Shareholder Requirements Set Out by EU Banking Regulators

EU regulators are introducing new rules for crypto companies and their shareholders. Find out what these rules mean for the crypto industry and how they will affect ownership, governance, and bonuses.

Vetting Shareholders and Executives

Under the proposed rules, EU crypto companies will face stricter regulations when it comes to their shareholders and executives. Shareholders with a stake of more than 10% will be subject to vetting, similar to the rules applied in the banking sector. This vetting process aims to ensure that shareholders and executives have a good reputation and are free from previous convictions or sanctions.

High-Profile Crypto Executives in Legal Battles

The introduction of these regulations comes at a time when several high-profile crypto industry executives are fighting legal battles. Figures such as FTX's Sam Bankman-Fried, Celsius' Alex Mashinsky, and Binance's Changpeng "CZ" Zhao are currently facing charges in the United States relating to misleading customers, fraud, and failure to comply with securities laws. The new EU rules aim to prevent individuals involved in such legal issues from being part of crypto companies.

MiCA: The Markets in Crypto Assets Regulation

The European Union is implementing a new regulation called the Markets in Crypto Assets (MiCA) regulation, set to take effect in December 2024. MiCA requires crypto companies to demonstrate that their owners and executives have a good reputation. Failure to meet these standards can result in the withdrawal of the MiCA authorization, preventing crypto companies from operating within the EU.

Maintaining Good Repute at All Times

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA), the regulatory agencies responsible for banking and securities markets law, have emphasized the importance of maintaining a good repute. Both shareholders and board members of crypto asset service providers are required to have a clean record, free from offenses related to money laundering, terrorist financing, or any other offenses that could impact their reputation.

Applying Lessons from the Financial Sector

Ownership curbs have been implemented in other parts of the financial sector to prevent individuals with questionable backgrounds from acquiring major shareholdings. Notably, former Italian Prime Minister Silvio Berlusconi faced ownership restrictions due to his previous conviction for tax fraud. The crypto industry is now adopting similar measures to ensure that individuals involved in illegal activities are not allowed significant influence within the sector.

Stablecoins and Limits on Bonuses

The regulations proposed by EU regulators also address stablecoins, which are cryptocurrencies tied to the value of other assets. Companies issuing stablecoins will face restrictions on staff bonuses. This approach mirrors measures applied in the banking sector to control excessive risk-taking.

Conclusion

The new regulations set out by EU banking regulators bring increased scrutiny to the crypto industry. By vetting shareholders and executives, ensuring a good reputation, and implementing ownership curbs, the EU aims to promote transparency and integrity in the sector. As the crypto landscape continues to evolve, these regulations are crucial for protecting investors and maintaining trust in the industry.