EU Lawmakers Propose Having New Regulator To Identify Crypto Blind Spots
As cryptocurrencies continue to penetrate the global financial markets, lawmakers are having a tough time grappling with regulatory issues. Moreover, with the cryptocurrency industry being relatively very different from the traditional finance, lawmakers want to ensure that there are no loopholes to be exploited.
As a result, the European parliament has published a new study to identify any legislative blind spots relating to the digital currency oversight in the European Union. The report considers different cryptocurrency use-cases like token-based fundraising, stablecoins, threats considering money laundering, and other developments which require regulatory involvements.
The report states that illicit players can potentially use cryptocurrency mining as a new vehicle to “create clean cash”. It states: “Newly mined coins are by definition ‘clean’, so if someone (e.g., a bank) is willing to convert them into fiat currency or other crypto-assets, the resulting funds are also clean. A first regulatory step could be to try to map the use of this technique and subsequently, if it effectively proves an important blind spot, to consider appropriate countermeasures.“
Besides, the lawmakers have identified several other blind spots in the existing crypto regulations like financial service providers or crypto-to-crypto exchanges dealing in token sales.
The European Parliament has also recommended to widen the scope of cryptocurrency definition thereby including tokens which can help in cracking down other illicit fundraising activities.
We all know that the inherent decentralized nature of cryptocurrency pose some money laundering risks as well. Besides, some cryptocurrencies are privacy featured. Thus, to combat any money-laundering risks, the European Parliament has recommended the creation of a regional Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regulator.
The Parliament has stated that the new regulatory body shall be staffed with “highly trained IT personnel capable of analyzing the AML/CFT risks new technologies bring.”
Moreover, the parliament has also mentioned the entry of private players and government institutions looking to launch their own stablecoins. It notes that these stablecoins pose a unique challenge as being “built on top of existing, large and/or cross-border user bases,” warning that they “have the potential to scale very quickly to achieve a global or other substantial footprint.”