European Commission Says MiCA Oversight Would Have Prevented FTX Collapse

An EU official has said that the MiCA regime would have prevented FTX’s failures.

Speaking at a hearing of the European Parliament’s Committee on Monetary Affairs on Wednesday (Nov. 30), Alexandra Jour-Schroeder, the deputy director general of the European Commission’s financial stability unit, was critical of the recently collapsed cryptocurrency exchange.

She said that had the EU’s Markets in Crypto Assets (MiCA) regulation been in force, “no companies providing crypto assets in the EU would have been allowed to be organized, [or] perhaps it’s better to say, disorganized, in the way FTX reportedly was.”

Commenting on the causes of FTX’s bankruptcy earlier this month, Jour-Schroeder said “there were a number of very questionable […] practices at FTX that were responsible, in our view, for the failure.”

Related: European Parliament Delays Vote On MiCA

Specific failures she cited include “governance of the company, corporate controls, record keeping, misuse of customer assets, unwarranted risk-taking and potentially even fraud.”

Although insistent that MiCA will help protect EU consumers and investors from corporate mismanagement of the kind that led to FTX’s downfall, Jour-Schroeder recognized the global interconnectedness of the crypto economy.

“We have to be very vigilant that our EU protections should not be undermined by jurisdictions that ultimately fail to regulate and supervise their companies,” she said, adding that such foreign regulatory failings undermine market integrity all over the world.

She therefore recommended that the EU engages actively with third countries and international regulators to encourage them to enact their own crypto asset regulation and supervision. “MiCA is a good model for that,” she stated, urging the European Parliament not to delay in passing the legislation.

Following Jour-Schroeder, Steffen Kern, the head of risk analysis at the European Securities and Markets Authority (ESMA) also pointed to poor oversight of crypto asset providers.

He told the hearing that ESMA has previously issued warnings about a lack of “client asset segregation” at crypto exchanges, a failing that he said contributed to the collapse of FTX.