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EU proposes first set of Principles for crypto assets
The European Union has taken a significant step forward in its bid to regulate the crypto assets world following its own executive branch issued its most extensive proposals to date for supervising the growing sector.
Tye measures indicated within the EU's digital finance plan include cryptocurrencies not presently included in general regulation in addition to a number of so-called stablecoins.
The aim is to not just reduce volatility in cryptocurrency trading or to provide more regulatory certianty for investors but also to reduce market fragmentation in Europe by ensuring that once a crypto trading organization is approved in one EU state, it's free to operate in all other EU states.
"We must proactively embrace digital transformation, while mitigating any potential risks," said Valdis Dombrovskis, executive vice-president of the European Commission. "A digital and innovative single market for finance will benefit Europeans and be key to Europe's economic recovery by delivering better financial products for consumers and opening up new financing channels for businesses."
The Regulation on Markets in Crypto Assets or MiCA bill provides defintions on which constitutes a crypto asset in addition to various token sub groups. Additionally, it will lay down rules for electronic asset custody and funding requirements as well as the relationship between token issuers and token holders.
The bill also stipulates that providers of any crypto-based encryption services have a physical presence within the EU.
There are also measures to deal especially with stablecoins following issues raised by several finance ministers within the EU earlier this month.
If the bill is passed it would make the EU one of the most regulated centers for crypto trading and digital assets. However, there is very likely to be a protracted legislative journey beforehand. The bill must be debated by the European Parliament as well the various national governments before it could be passed into law. Meanwhile the Commission has read more said that it hopes to see the framework in place by 2024.
The fact that any law has to be implemented at a national level may turn out to be a sticking point. The Commission has stated its preference for more regulatory harmonisation at an EU-wide level.
"Truly integrated and convergent oversight is needed to ensure a truly level playing field for all market players," said Domborvskis. "This will be particularly relevant in a post-Brexit world, with multiple financial centres in the European Union."
But achieving harmonisation has proved difficult in the past and EU countries have recently decreased a 2017 Commission proposal to bolster supervisory powers in an EU level in favour of preserving power at a national level.