EU Transparency Register Identification Number: 78787381113-69

March 2020

EC CONSULTATION ON AN EU FRAMEWORK FOR MARKETS IN CRYPTO-ASSETS

General Comments

BNP Paribas Group would like to thank the European Commission (EC) for the opportunity to provide its views on an EU framework for markets in crypto-assets. Considering that cryptocryptocryptocrypto----assets could assets could assets could assets could have very important implications for the banking and financial sector in terms of potential have very important implications for the banking and financial sector in terms of potential have very important implications for the banking and financial sector in terms of potential have very important implications for the banking and financial sector in terms of potential opportunities and benefits as well as in terms of new risks related, for example, to financial opportunities and benefits as well as in terms of new risks related, for example, to financial opportunities and benefits as well as in terms of new risks related, for example, to financial opportunities and benefits as well as in terms of new risks related, for example, to financial stability, monetary policy ostability, monetary policy ostability, monetary policy ostability, monetary policy or fight against money laundering and financing of terrorist r fight against money laundering and financing of terrorist r fight against money laundering and financing of terrorist r fight against money laundering and financing of terrorist activitiesactivitiesactivitiesactivities, we consider this consultation as an important step in the collective thinking to be conducted in this area and are pleased to provide our preliminary considerations. In general terms, we welcome the Commission's wish to develop a clear legal framework for we welcome the Commission's wish to develop a clear legal framework for we welcome the Commission's wish to develop a clear legal framework for we welcome the Commission's wish to develop a clear legal framework for cryptocryptocryptocrypto----assets.assets.assets.assets. Future EU rules will have to provide stakeholders with the legal certainty they need for the development of crypto-assets related activities. In this respect, these EU rules will have to strike the right balance between the search for innovation and the protection of consumers strike the right balance between the search for innovation and the protection of consumers strike the right balance between the search for innovation and the protection of consumers strike the right balance between the search for innovation and the protection of consumers and investorsand investorsand investorsand investors. The adoption of a European regulatory framework should also contribute to EU EU EU EU attractivenessattractivenessattractivenessattractiveness and strengthen its capacity to influencapacity to influencapacity to influencapacity to influence international standardsce international standardsce international standardsce international standards in this area. However, given the fact that both the various types of cryptoHowever, given the fact that both the various types of cryptoHowever, given the fact that both the various types of cryptoHowever, given the fact that both the various types of crypto----assets and the corresponding assets and the corresponding assets and the corresponding assets and the corresponding markets are not stabilized yet, temporary regulatory frameworks might be useful to allow markets are not stabilized yet, temporary regulatory frameworks might be useful to allow markets are not stabilized yet, temporary regulatory frameworks might be useful to allow markets are not stabilized yet, temporary regulatory frameworks might be useful to allow experiments with a sufficient levelexperiments with a sufficient levelexperiments with a sufficient levelexperiments with a sufficient level of flexibility.of flexibility.of flexibility.of flexibility. As suggested by the European Commission, we deem it necessary to develop a European we deem it necessary to develop a European we deem it necessary to develop a European we deem it necessary to develop a European classification of the various types of cryptoclassification of the various types of cryptoclassification of the various types of cryptoclassification of the various types of crypto----assetsassetsassetsassets. Indeed, such a classification would make it possible to define rules adapted to each of the different categories of assets thus defined. The classification, which should be set at the European level, could be based primarily on the crypto-asset’s economic function. This European taxonomy should follow the “same business, same risks, same business, same risks, same business, same risks, same business, same risks, same rules, same supsame rules, same supsame rules, same supsame rules, same supervisionervisionervisionervision” principle. In other terms, if the economic function and purpose of a crypto-asset are the same as a regulated asset class, it should be subject to the same set of financial and prudential rules. Moreover, any entity or intermediary engaging in crypto-assets activities that are equivalent to those performed by regulated financial entities or intermediaries, should be subject to the same legal requirements (in particular with respect to prudential and anti-money laundering issues). To date, the taxonomy proposed by the EC, which distinguishes between “payment”, “investment”, “utility” and “hybrid” tokens, seems relevant, and consistent with the state of the art. These different categories seem broad enough to cover all current cases of use and could be used to define the main legislative principles at level 1, while technical aspects and potential sub-categories of crypto-assets could be addressed by the European supervisory authorities (ESAs) at the second level. Beyond this classification, as regaas regaas regaas regards “regulated” cryptords “regulated” cryptords “regulated” cryptords “regulated” crypto----assets, i.e. those that qualify as assets, i.e. those that qualify as assets, i.e. those that qualify as assets, i.e. those that qualify as “financial instruments” under MiFID II and those qualifying as “e“financial instruments” under MiFID II and those qualifying as “e“financial instruments” under MiFID II and those qualifying as “e“financial instruments” under MiFID II and those qualifying as “e---- money” under EMD2, we money” under EMD2, we money” under EMD2, we money” under EMD2, we consider that an adaptation of existing regulations consider that an adaptation of existing regulations consider that an adaptation of existing regulations consider that an adaptation of existing regulations –––– MiFID, EMIR, CESDR, etc.MiFID, EMIR, CESDR, etc.MiFID, EMIR, CESDR, etc.MiFID, EMIR, CESDR, etc.---- would be the would be the would be the would be the right approach,right approach,right approach,right approach, whereas, as regards nonwhereas, as regards nonwhereas, as regards nonwhereas, as regards non----regulated assets, i.e. all the cryptoregulated assets, i.e. all the cryptoregulated assets, i.e. all the cryptoregulated assets, i.e. all the crypto----assets that are assets that are assets that are assets that are not regulated at EU level, the principle of a new bespoke regime, as proposed by the not regulated at EU level, the principle of a new bespoke regime, as proposed by the not regulated at EU level, the principle of a new bespoke regime, as proposed by the not regulated at EU level, the principle of a new bespoke regime, as proposed by the Commission, seems to be necessaryCommission, seems to be necessaryCommission, seems to be necessaryCommission, seems to be necessary. In any case, given that the environment of the crypto-assets

2

is still immature and that the necessary perspective and feedback that could allow to design fully appropriate rules are not yet available, we believe that it would be extremely useful to set up as soon as possible a European framework allowing experiments, under the supervision of the ESAs. Stablecoins are also a core issueStablecoins are also a core issueStablecoins are also a core issueStablecoins are also a core issue, given their potential impacts for monetary policy transmission and financial stability. In this respect, we believe that only a CBDC (central bank digital In this respect, we believe that only a CBDC (central bank digital In this respect, we believe that only a CBDC (central bank digital In this respect, we believe that only a CBDC (central bank digital currency) or a commerccurrency) or a commerccurrency) or a commerccurrency) or a commercial bank digital currency, since they are different forms of a genuine ial bank digital currency, since they are different forms of a genuine ial bank digital currency, since they are different forms of a genuine ial bank digital currency, since they are different forms of a genuine money, can fully perform the functions of money : smoney, can fully perform the functions of money : smoney, can fully perform the functions of money : smoney, can fully perform the functions of money : store of value, means of payment andtore of value, means of payment andtore of value, means of payment andtore of value, means of payment and unit of unit of unit of unit of accountaccountaccountaccount. However, it seems that the impact the CBDC could have both in terms of financial stability (risk of “digital” bank run) and on the monetary policy transmission (cost and volume of bank lending and money creation) should be carefully monitored. Moreover, as regards the financial markets, in order to carry out endin order to carry out endin order to carry out endin order to carry out end----totototo----end transactions witend transactions witend transactions witend transactions with “tokenised” assets on the h “tokenised” assets on the h “tokenised” assets on the h “tokenised” assets on the blockchain, financial institutions need a liquid and safe asset for making settlements. A blockchain, financial institutions need a liquid and safe asset for making settlements. A blockchain, financial institutions need a liquid and safe asset for making settlements. A blockchain, financial institutions need a liquid and safe asset for making settlements. A detailed analysis should be conducted to assess whether a CBDC and/or a European wholesale detailed analysis should be conducted to assess whether a CBDC and/or a European wholesale detailed analysis should be conducted to assess whether a CBDC and/or a European wholesale detailed analysis should be conducted to assess whether a CBDC and/or a European wholesale ledger for commercial bank digital currenciesledger for commercial bank digital currenciesledger for commercial bank digital currenciesledger for commercial bank digital currencies,,,, that would be convertible at parity with the that would be convertible at parity with the that would be convertible at parity with the that would be convertible at parity with the euroeuroeuroeuro

****,,,, would be the best solution to satisfy this needwould be the best solution to satisfy this needwould be the best solution to satisfy this needwould be the best solution to satisfy this need. Commercial bank digital currencies could be an effective way to allow the circulation of money on a blockchain and make a perfectly safe and liquid payment instrument available on it without jeopardizing the current framework of monetary policy which has very much proved its worth. In any case, the development of an “eIn any case, the development of an “eIn any case, the development of an “eIn any case, the development of an “e----euro”euro”euro”euro”,,,, whether CBDC and/or commercial bank digital currencywhether CBDC and/or commercial bank digital currencywhether CBDC and/or commercial bank digital currencywhether CBDC and/or commercial bank digital currency, , , , would significantly help blocwould significantly help blocwould significantly help blocwould significantly help blockchainkchainkchainkchain----based financial services to scale up and would also enhance the attractiveness and based financial services to scale up and would also enhance the attractiveness and based financial services to scale up and would also enhance the attractiveness and based financial services to scale up and would also enhance the attractiveness and international role of the eurointernational role of the eurointernational role of the eurointernational role of the euro. Among the important topics is also the question of the conservation of security tokens. Indeed, we believe that a clarification of ta clarification of ta clarification of ta clarification of the legal framework applicable to the conservation of security he legal framework applicable to the conservation of security he legal framework applicable to the conservation of security he legal framework applicable to the conservation of security tokens by depositaries and their duty of restitutiontokens by depositaries and their duty of restitutiontokens by depositaries and their duty of restitutiontokens by depositaries and their duty of restitution, provided, in some cases by the UCITS and AIFM Directives, will be necessary in order to provide sufficient legal certainty for this activity.

*Such a ledger - which could be named “e-euro” -, accessible only to financial intermediaries, could help for the

unlocking of the full potential of the blockchain technology.

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112