The European Union Is Working On A New Cryptocurrency Regulatory Regime
Global stablecoin projects from the across the world will have to meet some stricter regulatory rules if they have to operate in the European Union. In this regard, the EU is working on a new cryptocurrency regime says EU’s lead economics minister, Valdis Dombrovskis.
During his speech at the Digital Finance Outreach 2020 earlier this week, Dombrovskis said that Europe needs to seize this opportunity and take a lead role in setting up the new rules for digital finance.
“This is a good chance for Europe to strengthen its international standing and to become a global standard-setter, with European companies leading new technologies for digital finance,” he said. The economics minister has said that the first test case for new regulatory regime would be cryptocurrencies.
Currently, the European law covers rules for some cryptocurrencies such as the security tokens. However, the cryptocurrencies that fall in the stablecoin category still remain largely unregulated. Dombrovskis added that this “Lack of legal certainty is often cited as the main barrier to developing a sound crypto-asset market in the EU”.
Moreover, one of the major challenges that EU is currently facing is that some of its members have taken matters into their own hands. Well, this negatively affects the market integration making it further difficult for businesses to operate within the EU trading bloc.
The new regulatory regime aims to address all these bottlenecks. In addition to covering digital assets under the new rules, the EU also plans to tweak existing standards across its member countries in order to accommodate digital assets.
Dombrovskis hasn’t provided much details into how the future regime would look like. However, he said that the framework would include measure that support and promote innovation.
They first plan to launch a pilot scheme that gives some space to regulators to experiment new solutions, and also monitor and observe them. But as a caveat, he also added that the EU is planning to bring stricter rules on projects that are deemed to be termed as “global stablecoins”.
The EU had a tough time dealing with Facebook’s Libra launch last year. Such stablecoins that operate on a global map can bring more challenges for the regulators and Dombrovskis says that they can potentially disrupt the monetary and financial stability.
Speaking about the rules in general, Dombrovskis said that “Overall, our approach will be proportionate and relate to the level of risk. That means lighter rules for less risky projects”. Concluding his speech by speaking about global stablecoins, Dombrovskis said “their potentially systemic role [means] our rules will be stronger.”