LONDON: Facebook's proposed Libra cryptocurrency falls into a "big gap" in European Union financial regulation at a time when the bloc's ability to tackle money laundering is already stretched, a top EU regulator said on Thursday.

Jose Manuel Campa, chair of the European Banking Authority (EBA) said it was necessary to "keep an eye" on cryptoassets like Libra. The watchdog had issued investor warnings before Libra was even mooted that cryptoassets could be channels for money laundering activities, he said.

Explaining that financial assets are covered by EU investment laws while electronic payments came under payments rules, Campa told the European Parliament's economic affairs committee: "There is a big gap in between where most of these assets fall."

An assessment of Libra so far indicated it would be "in that big gap", he added.

Stopping money laundering has shot up the agenda in Europe after a spate of scandals at banks, including Danske Bank . Denmark's biggest lender has admitted to having handled 200 billion euros of suspicious transactions through its Estonian branch between 2007 and 2015.

There is no consensus within the 28-country EU for a standalone agency to crack down on money-laundering, leaving enforcement to national authorities that have wide discretion and differing approaches.

This left the EBA looking like a poorly resourced "paper tiger", only able to issue guidelines to national regulators, lawmakers said on Thursday.

The Paris-based agency has just three staff working on ensuring that national authorities comply with EU anti money-laundering rules, with another eight due to be added over the next three years, Campa said.

"We have very limited resources," Campa said.

But lawmakers slammed a decision by national supervisors in April to effectively clear financial regulators in Estonia and Denmark over potential legal breaches in how they applied EU money laundering rules in relation to Danske Bank.

"That EBA is able to conclude no breach in union (EU) law is really a scandal from my point of view. We need a strong EBA," said Niels Fuglsang, a Danish member of the committee.

Campa said the EBA board was looking at how to make better use of its "breach of union law" procedure, which proved less effective in historic cases like at Danske Bank.

An official from the European Commission told lawmakers that the EU executive could bring its own EU Treaty violation case in relation to Danske case.

"Things have not been concluded. We are still analysing that matter," she said.