The European Securities and Markets Authority (ESMA) is pushing for mandatory external audits of cybersecurity defenses among crypto companies.
The call comes as part of an effort to protect consumers from the increasing risks associated with cyber threats targeting the cryptocurrency sector, according to a Financial Times report.
ESMA is calling for stricter cybersecurity measures within the upcoming Markets in Crypto-Assets Regulation (MiCA). The measures are set to be fully enforced by December.
EXPLORE: 15 Best Meme Coins to Buy in August 2024 – Top Meme Coins
ESMA Suggests Crypto Firms Be Audited By Third Parties
ESMA proposed that crypto firms undergo third-party audits to evaluate their preparedness against cyber attacks. This is an addition that would be incorporated into the finalized MiCA rules.
These regulations, passed last year, are intended to set standards for the entire cryptocurrency ecosystem within the European Union.
However, the European Commission has expressed concerns over ESMA’s proposals. The EC suggests that the regulator may be overstepping its legal boundaries.
EU Watchdog Pushes for Stronger Cybersecurity Rules in Crypto!
Esma is pushing for tighter security regulations, calling for external audits to protect crypto companies from cyber attacks.
With $1.5B stolen in just the first half of 2024, cyber defences are more critical than… pic.twitter.com/Oe098SIdFK
— IBC Group Official (@ibcgroupio) October 16, 2024
Cybersecurity has been a persistent challenge in the cryptocurrency space, with hackers frequently targeting platforms to steal funds.
According to blockchain analytics firm Chainalysis, over $1.5 billion was stolen from crypto firms in the first half of 2024. This marks an 84% increase, compared to the same period in 2023.
Chainalysis reported nearly 150 hacking incidents within the first six months of the year. There is also a resurgence of attacks on centralized exchanges.
Under the new EU regulations, crypto firms must obtain a license from a member state. This demonstrates compliance with the rules, which include requirements for senior executives to be “fit and proper” and for robust anti-money laundering measures to be in place.
However, following a series of high-profile scandals involving crypto exchanges and trading firms, regulators believe additional steps are necessary to strengthen cybersecurity defenses.
Last month, for instance, Singapore-based exchange BingX lost $45 million to a hack while India’s WazirX suffered a $230 million breach in July, which led to the company’s collapse. Binance, the world’s largest crypto exchange, suffered a $570 million hack in 2022.
“Different exchanges may [run security] in different ways, and having a baseline standard is super helpful,” Arvin Abraham, a partner at Goodwin law firm, told the FT.
EXPLORE: Bitcoin Scam Guide – Avoiding Theft and Fraud
Non-EU Crypto Firms Under Scrutiny For MiCA Compliance
In August, ESMA raised concerns about non-EU firms providing crypto-asset services within the EU without fully complying with the MiCA regulation.
These firms, often operating through complex and opaque group structures, pose significant risks, including potential conflicts of interest and inadequate investor protection, the regulator warned.
ESMA also emphasized the importance of the “best execution” requirement, which mandates that EU brokers implement procedures ensuring the best possible outcome for their clients.
EXPLORE: 19 New Cryptocurrencies to Invest in 2024
Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.