The European Commission considers that crypto assets are the main application of blockchain. The new regulation for cryptocurrencies mainly focuses on stablecoins.
The European Commission (EC) prepared a draft regulation in which it classifies pegged cryptocurrencies or stablecoins as electronic money. The agency classifies Bitcoin and other cryptocurrencies as financial instruments.
The indications in the draft regulation state that one of the most prominent objectives is to supervise the issuance of stablecoins, “or any cryptocurrency that qualifies as electronic money.” Also, it seeks to standardize the rules on crypto-assets in all EU countries.
The draft regulation provides for the creation of a supervisory agency that will operate in all EU member countries. The European Banking Authority (EBA) will chair these supervisory teams and would assume a greater role in controlling the cryptocurrency sector in the region.
The document initially contemplated regulating most stablecoins within the e-money category, since “the goal of many of them is to create a means of payment.” When a reserve of assets backs them, “they could become a medium of exchange and store of value.”
However, some people believe that the existing legislation to regulate electronic money may not be entirely suitable for stablecoins. For that reason, issuers will have to meet a series of requirements that the new regulation establishes to launch these cryptocurrencies on the market.
The draft regulation also classifies Bitcoin and other cryptocurrencies as financial instruments. They would enter into the regulation of the Markets in Financial Instruments Directive II (MiFID II 2014/65/EU), which must undergo modification to make the inclusion.
Cryptocurrencies Are Necessarily Linked to Blockchain Technology
The fact that cryptocurrencies are the main application of blockchain has rushed the regulation of cryptocurrencies. Crypto assets “are inextricably linked to the promotion of blockchain technology throughout Europe.”
The document clarifies that the draft regulation is part of “a broader framework on crypto assets and distributed ledger technology (DLT).” “Proposals that ensure that the existing legislation does not pose obstacles to the adoption of new technologies” accompany it.
Besides, the EC states that its digital financial strategy aims to ensure adequate legislation of the European Union (EU) on financial services for the digital age. The EU has a declared and confirmed political interest in developing blockchain, which includes crypto-assets “as one of the main applications of DLT in finance.”
The agency considers that crypto assets are digital representations of value that can bring significant benefits, for both market participants and consumers. The EC thereby recognizes that “tokens can offer opportunities in terms of cheaper, faster and more efficient payments, especially cross-border ones, limiting the number of intermediaries.”
Given that the Commission sees cryptocurrencies as part of the “blockchain universe”, it considers their entry into the European regulatory framework essential. This would give greater impetus to the blockchain projects launched in recent years.
The draft regulation is also consistent with the policies of the European Union (EU) that aim to create the Capital Markets Union (CMU), which states the EC. It seeks to develop a single market for capital throughout the region, in which cryptocurrencies could enter as part of the financial system.
They expect to announce the final draft regulation of cryptocurrencies in the EU in the coming weeks. Upon approval, it would go into effect in late 2020.
By Alexander Salazar