European Union Releases Proposed Cryptocurrency Rules
On September 24th, the much anticipated first-ever rules to regulate cryptocurrency in the European Union was unveiled by the European Commission.
The executive branch of the European Union, proposed legislations crafted to reduce risks for investors. The legislation also gives legal certainty to companies issuing them. The executive branch of the EU is the agency responsible for managing the day-to-day business of the 27-nation bloc,
Valdis Dombrovskis, the panel’s executive vice president, in a statement, stated “The future of finance is digital. During the lockdown, many people shifted to accessing banking and other financial services online. Many more made contactless payments. Developing better financial products for consumers and opening new funding channels for companies will all help the recovery.”
The legislation is intended to reduce market fragmentation, as many digital finance providers only operate in one country. As a result, the measure allows cryptocurrency companies to provide its services across the other member states with approvals.
Mr. Dombrovskis noted that digital transformation is not risk-free. The new legislation intends to reduce these risks for investors, while also giving legal certainty to the issuers of cryptocurrency.
Firms that issue stable coins (a type of cryptocurrency) are likely to face stricter rules. They are designed to minimize the volatility of the price and hold their value, like the dollar. However, they have been controversial questions over whether issuers have the required reserves to back them.
When will the Cryptocurrency Legislation be Implemented?
It may take more than one year before these cryptocurrency proposals from the EU are implemented. According to Dombrovskis, the legislative process will take time. It could be at least a year, or probably longer. Ultimately, it depends on how much priority will be given to it by both member states and the European Parliament”.
The latest proposal will have to be approved by each EU government, as well as the European Parliament.
German Finance Minister Olaf Scholz has pledged to accelerate the EU’s financial reforms for regulating cryptocurrency. He noted that cryptocurrency reforms could help fuel the economic recovery. “