EU Plans for Crypto Regulation as Stablecoins Remain a Concern
A leaked draft document reveals that the European Commission (EC), is preparing to regulate the digital asset markets.
Coindesk first reported the 168-page draft. It is expected to be published officially later in the month. Even if the recommendations were implemented they would not be included in the European Union laws before 2022.
This document indicates that the regulator plans to introduce Markets in Cryptoassets (MiCA), which will regulate digital assets.
This will give legal clarity to the currently loosely regulated cryptocurrency market, but it is not clear how much.
A closer look at the draft reveals that the commission is more concerned about the stablecoins than the whole of digital currencies.
“A relatively recent subset of crypto-assets has emerged and attracted both the attention of both regulators around the globe, and the public,” the draft stated.
“While crypto-asset markets remain small and do not pose a threat for financial stability, this could change with the emergence of’stablecoins.’ They seek wider adoption and incorporate features that aim to stabilize their value.
This could be because of Facebook’s plans to launch Libra, which is a stablecoin tied to a basket fiats. The structure of the digital currency was changed by the Libra Association, which updated its whitepaper earlier in the year.
Local Regulators are a Step Ahead
Although the bloc of 27 countries has yet to make a decision on cryptocurrency, regulators in some European nations are making progress to clarify crypto.
BaFin in Germany is already considering digital assets as financial instruments. It also mandated licensing for most activities within the sector. Other regulators are slowly following the Financial Action Task Force’s (FATF) recommendations.
The broad definition of crypto by the EC is in line with that of the FATF’s virtual asset service providers (VASP) classification.