EU Moves Ahead with Regulating Cryptocurrencies
According to a Bloomberg article published on September 24, the European Union (EU) is moving ahead with its plan to regulate digital currencies to protect its financial markets without depriving citizens and companies of the new technologies.
In a new initiative unveiled by the EU today, the Union’s executive arm will establish clear ground rules for cryptocurrencies. This is being done to cover grounds that are not typically captured by traditional financial regulations and can leave investors dealing in cryptocurrencies in a muddy situation in terms of legal protection.
Notably, the proposal reportedly also seeks to regulate stablecoins and Facebook’s ambitious Libra project that has irked regulators the world over since its launch in 2018.
Commenting on the development, Valdis Dombrovskis, Executive Vice President, European Commission, noted:
“We should embrace the digital transformation proactively, while mitigating any potential risks.”
“An innovative digital single market for finance will benefit Europeans and will be key to Europe’s economic recovery by offering better financial products for consumers and opening up new funding channels for companies.”
What are the Rules?
Per the finer details of the proposal, cryptocurrency companies such as trading platforms would henceforth be required to have a physical presence in the EU and subject themselves to capital requirements. Interestingly, the report adds that “the most stablecoins” would be supervised by the European Banking Authority.
The proposal will now face debate between the European Parliament and national governments before it becomes law. The commissioned has expressed the desire to have a full-fledged regulatory framework for crypto assets by 2024.
The Need for Clear Regulations
Close followers of the developments in the cryptocurrency space would remember the spectacular collapse of Germany-based Wirecard AG, a payments firm that officially worked as a tech firm and thus evaded the strict oversight associated with traditional financial firms.
Against that backdrop, and to ensure such unfortunate chains of events do not recur, the EU is now keen on assessing whether existing regulations for the fragmented industries are up to the mark, and if not, what are the ways in which they could be alleviated.
In related news, As reported that the EU had proposed the creation of a single market for trading cryptocurrencies.