EU Market Regulator Demands Stricter Crypto Regulations

The European Securities and Markets Authority (ESMA) is urging EU lawmakers to tighten crypto regulations by requiring external cybersecurity audits for companies in the sector.

This call comes amidst a surge in cyberattacks, which have exposed significant risks to consumer protections.

ESMA's recommendation is part of proposed amendments to the upcoming Markets in Crypto-Assets Regulation (MiCA), set to take full effect in December 2024.

A key element of the proposal is mandating third-party audits to identify and address cybersecurity vulnerabilities on crypto platforms.

With more than $1.5 billion stolen from crypto platforms in the first half of 2024—an 84% increase from the previous year—ESMA underscores the urgency of these measures.

High-profile breaches, including the $52 million hack of Singapore-based BingX in September and the $235 million theft from India's WazirX in July, further demonstrate the growing threats facing the industry.

Call for Better Cybersecurity Guidelines Sees Resistance

While MiCA has established licensing requirements and anti-money laundering (AML) protocols, ESMA's push for mandatory cybersecurity audits has encountered resistance.

The European Commission (EC) expressed concerns that the proposal may extend beyond MiCA's original scope.

Despite this, some regulators and industry experts argue that the increasing frequency and sophistication of cyberattacks warrant additional oversight.

This call for stronger cybersecurity is not confined to Europe—recently, the European Parliamentary Research Service (EPRS) highlighted the need for heightened scrutiny of crypto operations globally, particularly in regions like the US, where regulatory frameworks are less unified.

As MiCA's full implementation approaches, it remains unclear whether the EU will adopt ESMA's proposed audit mandate.

However, the push for tighter security reflects a global effort to bolster the crypto industry's defenses against cyber threats and ensure stronger consumer protections in a rapidly evolving market.