The EU Commission plans to reveal the most concise rules regarding cryptocurrency and blockchain infrastructure, in a push to fuel financial innovation.
EU Cryptocurrency & Blockchain Rules
According to a recent media report by Reuters, the European Commission plans to fuel financial innovation by implementing the most comprehensive rules surrounding cryptocurrencies and blockchain technology. In an environment where region-wide regulations fell to the way side, individual member states in the EU started to enact their own regulations and rulesets. According to the European Commission, they plan to override member state initiatives by issuing “regulatory stamps” that essentially replace rules introduced in other EU states.
Introduction of “Passports”
According to the EU, they plan to implement framework where cryptocurrency issuers and service providers have to apply for a passport, which gives them EU wide single market access to operate and serve clients. In obtaining a passport, investors in the digital asset space can be ensured that the EU has vetted these entities prior to formulation.
Companies that plan to operate in the EU may be expected to fulfill certain safeguards such as capital requirements, custody of assets, rights of investors against the issuers, and others. It is important to note that based on the Commissions outlook, it is expected that issuers of global stablecoins will be expected to abide by even stricter protocols.
It seems as if regulatory authorities are starting to understand the significance of this sector, taking a much more hands on approach this year. This is not just occurring in the EU. This year has already seen other geographic regions like Nigeria moving forward with regulation. Similar to the EU, Nigeria was planning to introduce a more streamlined approach in terms of companies and other service providers in this market. This was put in in place to ensure that companies were not operating with unregistered securities.
How It Will Be Introduced
In order to study the framework, it is believed that the EU will operate something called a “EURO Sandbox.” The Sandbox will be way to evaluate new procedures on a temporary basis. At its origination, companies in the crypto / blockchain space would be exempt from various rules, in order to gauge the environment around various products and services. The Commission mentions that similar approaches have been carried out in Britain for several years.
Many visionaries in this sector believe that startups and other companies will have to ultimately work with regulators if the market ever expects to see mass adoption. For the longest time, the EU has been extremely divided in terms of cryptocurrency and blockchain regulation. For example, the EU pretty much ignored crypto exchange regulation, leaving it up to the member states. Due to the lack of region wide oversight, member states were forced to form their own regulations.
This behavior has made it extremely difficult for startups to scale. When there is a lack of transparency surrounding regulation, it makes it nearly impossible to seek mass adoption. With the EU planning to override member state initiatives, it will put the EU in a better position to drive financial innovation.