A committee of the European Parliament calls for the end of crypto-related regulatory arbitrage - a way to use loopholes in regulatory systems to avoid unfavorable regulations - proposing that crypto regulation should be made at the international level.

Though various countries have tackled the regulatory challenges posed by the global, easily accessible crypto assets, the national actions aren't necessarily aligned with each other, opening the door to regulatory arbitrage, finds a study on developments of crypto assets and related regulatory concerns and responses, requested by the Committee on Economic and Monetary Affairs (ECON) - which, among other things, is responsible for oversight of the European Central Bank.

"To avoid regulatory arbitrage," argues the study, "rulemaking on cryptoassets should take place at the European level, preferably in the execution of international standards." 

If money laundering and terrorist financing (AML/CFT) are taken as an example, it says, which are also global phenomena, the criminals will base their activities in the country that offers the most favorable regulations, where the gaps in the regulatory systems are more exploitable. "This undoubtedly also holds true for ML/TF activities involving crypto-assets." The study goes on to explain that the US toughening its AML/CFT measures regarding crypto, the criminal activity will likely move to the EU. But if the standards are set on the international level, "the chances of effectively rooting out such activities are a lot bigger."

While the study finds the continuation of the cooperation between the Financial Action Task Force (FATF) and the EU necessary, and that the EU must incorporate the FATF's international standards, it also says "the EU could do better" and that it's "clearly lagging behind on international AML/CFT laws," adding that AMLD5 rules for crypto "were already outdated well before EU Member States were supposed to transpose them into their national AML/CFT laws." Therefore, action by individual Member States may be beneficial, though not sufficient.