Komal Joshi · Oct 20, 2020 . 6min read
EU rolls out a single, most comprehensive policy to regulate Cryptocurrencies
In EU's new rule, crypto exchanges will have a physical presence in the EU and become subject to capital requirements.
By Victor Ugochukwu · Sep 25, 2020 . 6min read
The EU has taken a proactive approach at regulating cryptocurrencies within its region in its latest Digital Finance Push. The commission has issued a comprehensive proposal on stablecoins as well as other cryptocurrencies.
As per a recent Bloomberg publication, the executive arm of the EU unveiled its latest plans in a bid to establish “clear ground rules for cryptocurrencies”. This is because they don’t have an explicit provision within its traditional financial rules. Moreover, because of the lack of adequate coverage within its traditional rules, investors exposure to risks therein may be high.
EU’s latest proposal on cryptocurrencies beamed its searchlight on Libra, primarily because once it eventually goes live, its coverage will be phenomenally broad. Added to the challenges cryptocurrencies have already started giving to banks seeks to ensure Libra’s launch doesn’t result in an existential threat to banks within its region.
In the EU’s new rule, crypto exchanges will have a physical presence in the EU and will be subject to capital requirements. The European Banking Authority has stablecoins as its prime target because exchanges offer these to their customers. Moreover, stablecoins has exploded this year with a market cap of over $20 billion, representing over 300% year-to-date.
Furthermore, this policy would be put up for debate between the European Parliament and national governments before it becomes law. The regional bloc hopes it would stamp this comprehensive into law on or before 2024.
The EU sees its latest approach on cryptocurrencies as a positive step to enhance its economic recovery.
The EU has been facing economic difficulties with the actualization of Brexit and the devastating economic impact of coronavirus. With the boom cryptocurrencies recorded in 2020 such as DeFi, the EU sees this as an opportunity for economic recovery. To reiterate this, Valdis Dombrovskis, an executive vice president of European Commission said,
“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.”
Moreover, the EU’s new policy to regulate cryptocurrencies will also put in check cases like Wirecard AG’s epic failure. Better to be proactive than reactionary as the case proved.
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