EU Is Ready to Regulate Cryptocurrency, According to Commission’s Vice President
The European Union (EU) is ready to regulate cryptocurrencies immediately and could begin drafting new legislation within months, according to the bloc’s top financial services chief.
EU Prepared to Regulate
The growth and widespread adoption of cryptocurrencies has created volatile trading conditions in the market, putting many investors at risk. Without adequate protections internationally, this new phenomenon could lead to severe consequences.
That was the general message put forward Monday by Valdis Dombrovskis, the European Commission’s Vice President.
“This is a global phenomenon and it’s important there is an international follow-up at the global level,” Dombrovskis told reporters at a roundtable attended by the European Central Bank and Financial Stability Board, among others.
“We do not exclude the possibility to move ahead at the EU level if we see, for example, risks emerging but no clear international response emerging.”
Currently there is no streamlined international response to the risks posed by cryptocurrencies. With the exception of China and Japan, which have ruled decisively on the digital assets, others are still feeling their way through the market. For EU policymakers, part of the concern is ruling too harshly on cryptocurrencies and driving business away to other regions. Some jurisdictions, such as Switzerland, have taken a more liberal approach to the market and have reaped the benefits. (Switzerland is, after all, Crypto Valley.)
Crypto to Take Center Stage at G20 Summit
EU members Germany and France are expected to table a new proposal to regulate the digital currency market at next month’s Group of 20 meeting in Buenos Aires. Economy chiefs from both countries penned a letter earlier this month saying cryptocurrencies must be regulated because they “could pose substantial risks for investors.”
Argentina will be the host of over 45 G20 meetings this year. Representatives from France and Germany are expected to deliver their joint proposal at the first of five meetings of finance ministers and central bank governors scheduled for Mar. 19-20.
It’s not yet clear what the French and Germans will propose next month. However, officials from both countries have warned that the crypto market could impact the region’s long-term financial stability. They also took issue with the word “currency” being used to describe digital assets, claiming it misrepresents the market and puts investors at risk.
Hacked and others have long speculated that many leading crypto assets behave more like commodities than currencies, although projects like Litecoin, Stellar, bitcoin cash and others are looking to change that perception.
One of the biggest risks policymakers can make is placing all digital currencies in one bucket. After all, different coins have different purposes. With more than 1,500 in circulation, the market is still trying to separate the duds from the winners. This process will likely continue for the foreseeable future.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.