EU Considers Stablecoin Regulation

September 23, 2020 09:55 AM
Crypto story of the day

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Crypto is mixed this morning with most of the Top 10 marginally lower. Some seemingly unrelated midcap alt-coins are gaining with both OMG and NEO up well over 10%.


CRYPTO STORY OF THE DAY

Over the past couple of weeks, a slew of reports and suggested crypto regulation have come out of the EU. In mid-September, EU finance ministers met in Berlin where crypto was a topic of discussion. During a press conference the executive president of the European Commission, the EU’s legislative branch, Valdis Dombrovskis said,“We will regulate the risks for financial stability and monetary sovereignty linked to so-called ‘stablecoins' used for payment purposed,” while touting potential benefits of crypto.

German finance minister Olaf Scholz echoed concerns for sovereignty. “What’s a responsibility of the state must remain a responsibility of the state, he said.

The meeting also saw finance ministers from Germany, France, Italy, Spain, and the Netherlands sign a joint statement that said stablecoins shouldn’t be allowed to operate in the EU until rules are established. 

A week after the Berlin meeting, Reuters wrote it had seen documents suggesting the EU will by 2024 “…put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector.”

The comments by EU officials are also accompanied by 2 prominent reports published in September. The European Parliamentary Research Service published a report on regulatory and supervisory challenges in regards to regulating crypto, claiming that adequate rules could add € 27 billion to € 55 billion to the EU economy by 2029. The European Central Bank’s (ECB) Crypto-Assets Task Force also published a report on stablecoins. The report claimed that stablecoins could grow in adoption to the point where they pose systemic risks to EU financial systems, warranting the development of rules and regulations. It is worth noting that some of the most recent EU regulation, the 5th Anti-Money Laundering Directive, was cited as the main driver behind trading platform Deribit’s decision to move its headquarters to Panama. 

The question regarding the recent focus on crypto regulation coming out of the EU is whether it's coming to some sort of head. Reuters suggested that concrete EU-level regulation will be ready by 2024, at the earliest. ECB President Christine Lagarde did say she expects a report on the feasibility of European central bank digital currency and the launch of public consultation in the coming weeks. This report, though, will not address stablecoin regulation, which is not under the ECB’s purview. While Reuters did also report that several major EU economies backed blocking the use of stablecoins until rules are established, such restrictive union-level measures are unlikely to be accepted by member states such as Estonia or Slovenia that have accelerated country-level regulation. As such, we are unlikely to see major changes in the way crypto is governed in the EU in the short to medium term, despite renewed periodic attention by the bloc’s officials. 

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