Portugal Prefers Global Crypto Framework to Reduce Arbitrage

Banco De Portugal chief Mário Centeno said on Monday that crypto regulations are unlikely to work without a global framework. He argued that the principle of “same-risk, same regulation” should apply to prevent arbitrage.

In his view, while not perfect, Europe’s Markets-in-Crypto-Assets (MiCA) regulation is an important step in regulating crypto “comprehensively.” Such a regime helps standardize local rules, Centeno said.

Arbitrage Is Hurting Business, Says One CEO

Whether local regulators will base rules on the type of entity or type of activity will be “an open question,” the central banker reflected in a speech at Banco De Portugal’s Financial Stability Conference in Lisbon. He added that it while decentralized finance (DeFi) promises to democratize finance, it is not clear whether this goal will become a reality.

Centeno’s speech echoes India’s Finance Minister Nirmala Sitharaman’s calls for a global crypto framework earlier this year. Before the G20 summit in Delhi, India asked the International Monetary Fund and the Financial Stability Board to develop high-level recommendations to standardize regional regulations.

Earlier this year, Pedro Borges of Mercado Bitcoin Portugal told BeInCrypto his business was fighting an uphill battle against lightly-regulated competitors. While by and large a positive for the industry, Portugal’s speed in developing crypto regulations meant his company had more overheads.

“Regulation hasn’t progressed as quickly in other countries, which forces us to face unfair competition because we see platforms – that aren’t regulated – offering a variety of services, including derivative financial products on cryptocurrencies, margin accounts, and the creation of new tokens. All of this is done without complying with the rules we are obligated to follow…We have solid regulation, but we are competing in an open market with those who don’t adhere to the same rules.”

Read more: 14 Best No KYC Crypto Exchanges in 2023

MiCA Rules Can Work But Need to Be Enhanced

Europe’s upcoming MiCA regulations will likely improve the situation, as its rules apply across all 27 members of the European Union bloc, including Portugal. Still, as one official from the European Central Bank pointed out last year, MiCA lacks adequate metrics for classifying crypto firms as significant.

To fix this, ECB supervisory board member Elizabeth McCaul proposes future revisions of the bill that consider metrics like trading volume and assets under custody. If collected from all companies within a corporate group, these data points would give regulators insight into an exchange’s global business rather than a local entity.

Read more: Top Crypto Exchanges and Trading Platforms in Europe

MiCA also lacks rules for decentralized finance, an umbrella term for disintermediated financial services deployed on certain blockchains.

This omission means that MiCA may not have an immediate impact on Portugal’s DeFi constituents, who make up a large percentage of Lisbon’s crypto demographic. In its State of Crypto Europe report, investment firm Greenfield named Lisbon the most important crypto hub ahead of Berlin, New York, and Singapore.

Crypto nomads attracted by the country’s zero-tax policy drove a massive influx of foreigners before the government changed the rules in 2022.

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