21.12.2022
EN
Official Journal of the European Union
C 486/33
victims to pay the ransom in cryptocurrencies such as Bitcoin (10).
The Regulation on Digital Operational Resilience for the financial sector (DORA), recently agreed by the co-legislators and currently in the process of being finalised in order to be published, provides uniform requirements concerning the security of network and information systems supporting the business processes of financial entities, including crypto-asset service providers, which is necessary to achieve a high common level of digital operational resilience.
3.2.
The crypto-assets ecosystem is also exposed to some degree of concentration risk with trading dominated by a relatively small number of entities (11).
A study found that less than 10 000 people worldwide collectively owned 4,8 million Bitcoins (12) — nearly a third of the 18,5 million Bitcoins mined thus far.
The latter carried a market value of nearly USD 600 billion.
The situation has not changed much.
The Bitcoin ecosystem is still dominated by large and concentrated players, be it large miners (13), Bitcoin holders or exchangers.
This concentration makes Bitcoin susceptible to systemic risk, and also implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants (14).
3.3.
In its latest report (15), the FSB states that market systems such as banking have been largely shielded from the volatility of crypto-assets.
However, the FSB warns about the increasing importance of digital assets in the operations of financial institutions.
Were a major stablecoin (used extensively for payments) to fail, this could further impact financial stability, at a time of growing uncertainty because of the war in Ukraine, with persistently high commodity prices.
A failing stablecoin could also lead to liquidity shortages within the broader crypto-asset ecosystem, thus limiting trading volumes.
3.4.
As noted in a previous opinion (16), the EESC fully supports efforts in the EU to increase supervision of crypto-assets.
However, due to their perceived anonymity, crypto-assets may still fall prey to criminal intent despite improvements in their tracking.
Crypto-assets have also recently featured most heavily as the preferred currency of cyber attackers, who use ransomware to hack into systems and then demand Bitcoin payments in return for not destroying or leaking the company's valuable data.
Moreover, there has been an increase in reports of crypto-Ponzi schemes.
The ECB also claims that cryptocurrencies are being used to evade sanctions imposed on Russian oligarchs because of the war in Ukraine (17).
The risk of misusing crypto-assets to circumvent the sanctions against Russia is an important reminder that these markets must be required to comply with the required standards, including information about investors, anti-money laundering and disclosure requirements.
3.5.
Misleading information and a lack of transparency is another cause of great concern.
Some crypto-assets are aggressively advertised to the public, using marketing material and other information that may be unclear, incomplete, inaccurate or purposefully misleading, overstating the potential gains while overlooking the risks involved.
Marketing is often done through influencers on social media who do not disclose whether they have a financial incentive to market certain crypto-assets, particularly the recent rise in non-fungible token art (NFT art) linked to various celebrities and sportspeople.
(10) (11) (12) (13) (14) (15) (16) (17)
Crypto-assets: Key developments, regulatory concerns and responses.
It is pertinent to highlight that the degree of concentration risk is in relative terms and limited to the crypto-assets ecosystem.
It has no bearing on the concentration of wealth as described in, for example, the Forbes World's Billionaires List.
Makarov, I., Schoar, A., Blockchain Analysis of the Bitcoin Market (April 18, 2022).
Crypto mining is the process of creating individual blocks added to the blockchain by solving complex mathematical problems.
The purpose of mining is to verify cryptocurrency transactions and show proof of work, adding this information to a block on the blockchain, which acts as a ledger for mining transactions.
Makarov, I., Schoar, A., Blockchain Analysis of the Bitcoin Market (April 18, 2022).
Assessment of risks to financial stability from crypto-assets.
EESC opinion on Crypto-assets and distributed ledger technology (OJ C 155, 30.4.2021, p. 31).
ECB President Christine Lagarde says that cryptos are being used to evade sanctions imposed on Russia.