ESMA Pushes for Stricter Crypto Regulation, Proposing Mandatory Cyber Audits

ESMA Pushes for Stricter Crypto Regulation, Proposing Mandatory Cyber Audits
ESMA Pushes for Stricter Crypto Regulation, Proposing Mandatory Cyber Audits

The European Securities and Markets Authority (ESMA) is calling for tighter crypto regulations in the European Union (EU), urging lawmakers in Brussels to mandate external cybersecurity audits for crypto companies. This push comes as part of ESMA’s efforts to enhance consumer protection in light of the rising number of cyberattacks targeting the cryptocurrency industry.

ESMA Proposes Cybersecurity Audits for Crypto Firms

According to a recent report from the Financial Times, ESMA’s proposal seeks to amend the Markets in Crypto-Assets Regulation (MiCA), a comprehensive regulatory framework for the crypto sector in the EU, which will be fully enforced by December 2024. MiCA aims to provide legal clarity and safeguard consumers within the largely unregulated crypto space, which has been marred by several high-profile collapses, including that of FTX.

ESMA’s recommendations include requiring crypto companies to undergo third-party cybersecurity audits to identify vulnerabilities in their systems. This proposal comes in response to a growing concern over cyberattacks, which have surged significantly in recent years. In the first half of 2024 alone, over $1.5 billion was stolen from crypto platforms, an 84% increase compared to the same period in 2023.

Resistance From the European Commission

Despite the urgency of the situation, the European Commission has pushed back against ESMA’s proposals, suggesting that they go beyond the original scope of MiCA. While ESMA declined to comment, critics argue that given the increasing frequency and severity of cyberattacks, stricter regulations are essential.

The past year has seen a string of high-profile hacks in the crypto sector. For instance, $45 million was stolen from the Singapore-based exchange BingX in September, while $230 million was drained from India’s WazirX in July. These incidents underscore the need for more robust security protocols across the industry.

Charles Kerrigan, a partner at CMS law firm, emphasized that “security is not something you can take lightly”, urging crypto firms to invest in stronger cybersecurity measures to prevent breaches.

Global Regulatory Pressures Mount

While MiCA already requires crypto companies to obtain licenses, adhere to anti-money laundering protocols, and ensure that senior executives meet certain standards, the growing number of cyberattacks has led regulators to demand even more stringent measures.

The European Parliamentary Research Service (EPRS) has also called for enhanced regulation beyond EU borders, noting that lax cybersecurity protocols in countries like the U.S., where crypto regulation is fragmented, pose significant risks.

As MiCA moves closer to full implementation, it remains uncertain whether ESMA’s recommendations for mandatory external audits will be adopted by the EU. However, the push for stronger security standards is part of a global effort to tighten cryptocurrency regulations and protect investors.

Website: CentBit.Online – Crypto & Blockchain Expert Bangladesh

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