ECB on licensing of Crypto-Asset Activities

While confidence in the financial system depends upon public awareness that only licensed institutions are operating within it, licensing should be done without hindering competition, financial innovation, or technological progress.
 
In the meantime, national frameworks governing crypto assets diverge quite extensively. For example, Germany requires a bank license for certain crypto activities, and several banks have applied for authorization. Thus, ECB is working to harmonize the licensing assessment process in this context.
 
Like any other licensing procedure, licensing requests involving crypto-asset activities and services are assessed according to the Capital Requirements Directive (CRD) criteria. Hereby, special attention is paid to the following:
 

• Business model considerations: whether or not the proposed activity matches the institution's overall activity and risk profile. 
• Internal governance considerations: whether the institution's policies and procedures are adequate for identifying and assessing crypto-asset risk.
• Fit and proper assessments: As in any licensing procedure, fit and proper assessments apply here, including evaluations of IT competencies. Knowledge and experience in the crypto field should  increase with the complexity or relevance of the crypto business.

Crypto assets bring to light certain types of risks, such as: 

• Operational risks: some risks may be associated with using special technology and outsourcing arrangements with third-party providers.
• Cybersecurity risks: others include theft of cryptographic keys and the compromise of login credentials.
• Risks associated with anti-money laundering/fighting terrorism financing (AML/CFT).
  
  
  

Basel Committee on Banking Supervision is reviewing the prudential treatment of crypto-asset exposures, including whether specific liquidity requirements are needed. As part of its commitment to fostering greater consistency across national prudential regimes, the ECB will work closely with national supervisors.
 
Within the Single Supervisory Mechanism (SSM), work is underway on banks' digital transformation, including the role of crypto technologies, so that a horizontal analysis can be completed by the end of 2022. The rapid development of this activity will, in any case, remain a significant focus of the European Banking Supervision for some time.