European Union Unveils Its First Digital Finance Strategy for Blockchain and Crypto
The European Commission has started putting a close attention to the developments in the crypto market. To bring more clarity for the companies operating in this space, the executive arm of the European Union announced its new digital finance and retail strategy along with legislative proposals for blockchain and cryptocurrencies.
This comes as part of the newly adopted Digital Finance Package to bring greater clarity for crypto companies. The European Commission said that “the future of finance is digital”, however, it is equally important to mitigate “any potential risks”.
With the new legislation in place, the EU aims at reducing “market fragmentation” in this space. The new plan means that crypto companies registered and authorized by any one of the 27 EU member nations will offer its services across all other states.
At the same time, there will be tougher rules for the stablecoin operators. Stablecoins are basically digital currencies whose value is pegged to stable assets like fiat currencies or other metals. However, stablecoins have been in controversy since the issuers have been accused of not having sufficient reserves to back them.
The Commission stated: “By making rules safer and more digital friendly for consumers, the Commission aims to boost responsible innovation in the EU's financial sector, especially for highly innovative digital start-ups, while mitigating any potential risks related to investor protection, money laundering and cyber-crime”.
To make sure that there are no roadblocks for new innovation due to the existing regulations, the Commission has also considered creating a regulatory sandbox pan Europe.
This will allow companies, regulators and innovators to create and test new developments in the blockchain sector by working together and without much pressure from the authorities.
The European Commission will also propose issuing a “passport”, a kind-of license that gives crypto issuers EU-wide single market access for safeguarding investors. These safeguards include custody of assets, capital requirements, rights of investor against the issuer, and a mandatory complaint holder procedure for investors.
The latest proposal still needs an approval from the EU governments and the European Parliament. Speaking to CNBC, European Commission Executive Vice President Valdis Dombrovskis said: “The legislative process will take time, at least a year, probably longer, depending how much priority will be given by both member states and the European Parliament”.