EU Markets Regulator Urges More Stringent Cybersecurity Audits
The European Securities and Markets Authority is pressing for new regulations that could hike the crypto industry’s cybersecurity. Amid the tide of cyberattacks against the sector, crypto companies need to be compelled to undertake independent external audits of their cybersecurity, says ESMA. The markets watchdog believes such a move will raise security for digital assets and improve consumer protection.
Cyber Attacks Grow In Crypto
For crypto firms, cybersecurity is seriously becoming important, especially because of the rise in cyberattacks. Companies that specialize in blockchain security, including TRM Labs, said recently that hackers have stolen close to $1.4 billion in crypto assets this year, which was nearly double what was lost last year. Chainalysis also reported that the number of hacks increased relatively modestly by 2.8% in 2024, though the value lost per hack has increased dramatically by 79.5%, from $5.9 million per hack last year to $10.6 million this year. This corroborates the pressing demand for crypto platforms to strengthen their security, particularly centralized exchanges, due to their vulnerability to attacks carried out by hackers.
ESMA’s Call for Mandatory Audits on Cybersecurity
Not surprisingly, given these concerns, the proposed measures by ESMA call for the mandatory third-party audits of crypto firms on their cybersecurity systems. Such external audits would test the robustness of crypto companies against cyberattacks and their level of preparedness to safeguard consumer assets. However, the European Commission has hinted at opposition, citing that such additional measures may fall beyond the scope of current regulatory mechanisms.
MiCA Framework and New Compliance Requirements
The new MiCA regime, which takes effect starting December 31, 2024, will, for the first time, require crypto firms to obtain licenses from EU member states and demonstrate compliance with anti-money laundering, as well as a myriad of other regulatory controls. Aspects of MiCA have begun taking effect. For example, Coinbase recently announced that it will be delisting non-compliant stablecoins on its European exchange toward the end of the year for new regulations.
Industry Response to Increased Regulation
While some industries applaud this push in regulation, others have countered the threat of overregulation. In the words of Paolo Ardoino, CEO of Tether: “Excessive cash reserve requirements against the issuance of stablecoins pose systemic risks to banks.” Lastly, tokens with privacy features in them are also being delisted in Europe, which includes Monero. The big exchanges that have stopped trading include Kraken, Binance, and OKX.
