European Union wants to 'remove regulatory hurdles' for Bitcoin and cryptocurrencies

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Key facts:

  • The pilot scheme will be enabled for three years, and will be supervised by EU regulators.
  • Exchanges, wallets and companies that issue crypto assets will be subject to this new regulation.

The European Union (EU) has decided to initiate a new regulatory regime for the market of Bitcoin and other cryptocurrencies. The ordinance will be temporary and will allow legal exceptions so that cryptocurrency companies can develop without major inconveniences.

This is how "The digital financial package" proposed by the European Commission last week, an economic strategy of the organization that seeks to motivate the use and regulation of digital finance, has recorded. To do this, they have decided to impose a new group of measures to be met by exchanges, wallets and companies that issue cryptocurrencies.

The plan will be supervised by the EU authorities with the aim of developing a regulatory framework that protects consumers, but also allows the free development of these markets. The document expresses that, although some cryptocurrencies such as Bitcoin are subject to the current legislation of financial services of the European Union, other cryptoactives could see their development hampered if they comply with current regulations.

In this sense, they have proposed starting a temporary pilot regime for the cryptocurrency market, where they will test the viability of a series of operational requirements that are uniform for the entire ecosystem. The authorities are committed to eliminating any regulations that prevent the proper development of these financial services, as well as being open to changing the measures proposed for their regulation.

Among the new ordinances, it is highlighted that any company that works with cryptocurrencies will need authorization from the regulators to provide services in the territory. Likewise, you must have a mandatory physical office in any member country of the European Union. Companies will also have to process their own "cryptocurrency passport" to offer their services in any region of the EU.

The cryptocurrency market must continue to comply with the anti-money laundering and customer identification (KYC) measures imposed in previous years. Accordingly, they must incorporate measures to prevent abuse in secondary markets, the use of privileged information (insider trading) and take security measures to prevent cyber attacks. Companies will also need to comply with prudential, organizational and custodial requirements.

As CriptoNoticias reported previously, companies dedicated to the issuance of stable cryptocurrencies (stablecoins) will be subject to much stricter measures, due to the fact that they manage reserve funds of fiat money. In this sense, the European Commission requires that these issuers must have their own "white paper", detailing their governance mechanisms, technical information and project data.

 

'Cross-border' cryptocurrency companies with a European passport

Because cryptocurrency companies will have their own passport and a physical office in the country where their services are authorized, such businesses will be supervised by the relevant financial authorities of the nation of residence. However, due to its cross-border nature, the European Commission considers it necessary to designate a point of contact for its regulation throughout the continent.

The document indicates that the European passport will operate with "strong safeguards" to guarantee the consumer financial stability and protection. Operators, on the other hand, will benefit from this passport by being able to operate in the 27 countries that make up the European Union, without having to worry about various regulations.

As for the companies that issue stablecoins, the authorities determined that the European Banking Authority will be in charge of supervising their operation. Likewise, national regulators will also have the power to monitor their operations and review their legal documents.

The pilot regime will remain in place for a period of three years, the statement highlights. The regulation will be reviewed periodically, allowing the authorities to gain a deeper understanding of the needs of the cryptocurrency market. However, for this proposal to become a reality for the crypto asset ecosystem, it will have to be approved soon by the countries of the Union and the European Parliament.

The coronavirus pandemic has motivated the incorporation of these measures as soon as possible. Due to the mandatory quarantines that EU countries have had to comply with, the use of digital payment methods has escalated in recent months, a phenomenon that raises alarms among regulators and serves as a precedent for the search for a comprehensive law that protect cryptocurrency consumers.

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