A much anticipated first-ever plan to regulate cryptocurrency in Europe was unveiled on Thursday (Sept. 24) by the European Commission.
The executive branch of the European Union (EU), the agency responsible for managing the day-to-day business of the 27-nation bloc, proposed legislation crafted to reduce risks for investors, while also giving legal certainty to companies issuing them.
“The future of finance is digital,” said Valdis Dombrovskis, the panel’s executive vice president, in a statement. “During the lockdown, many people shifted to accessing banking and other financial services online. Many more made contactless payments. Developing better financial products for consumers and opening new funding channels for companies will all help the recovery.”
The legislation is intended to reduce market fragmentation, as many digital finance providers only operate in one country. As a result, the measure allows crypto companies to provide its services across the other member states with approvals.
Still, Dombrovskis noted that digital transformation is not risk-free. The new legislation intends to reduce these risks for investors, while also giving legal certainty to the issuers of cryptocurrency.
Firms that issue stablecoins are likely to face stricter rules. They are designed to minimize the volatility of the price and hold their value, like the dollar, CNBC reported. However, they have been controversial, as there are questions over whether issuers have the required reserves to back them.
It may take more than one year before these proposals from the EU are implemented. “The legislative process will take time, at least a year, probably longer, depending on how much priority will be given by both member states and the European Parliament,” Dombrovskis told CNBC.
The latest proposal will have to be approved by each EU government, as well as the European Parliament, the EU’s directly elected chamber.
German Finance Minister Olaf Scholz pledged on Thursday (Sept. 24) to accelerate the EU’s financial reforms for regulating cryptocurrency, noting that they could help fuel the economic recovery, Reuters reported. “These are important proposals to make Europe’s financial sector really strong. My goal is to move the discussions forward quickly,” Scholz told the news outlet.