Report prepared for EU finance ministers has stated that European Member States should adopt common rules on cryptocurrencies and DLT technology. These rules should also apply to the process of creation, allocation, distribution and trading of the virtual assets.
Bruegel, a Brussels-based think tank has made the case for much clearer and more standardized rules on ICOs in order to mitigate risks and the possibility of exploitation. The document that is yet to be made officially public, will be presented to ministers at the end of the week.
Due to the size of the sector and the low percentage of trade in cryptocurrencies, the EU has so far not introduced or considered any comprehensive regulation. Fears over money laundering, fraud, and high volatility have so far discouraged them from making an official stance on the viability of the sector in terms of widespread regulation.
A volatile market
Since January this year, the market capitalisation of cryptocurrencies has fallen from $800 billion to just $200 billion, and Bitcoin has seen a drop of around 60% against the value of the dollar. But the expansion of crypto-related businesses into EU Member States such as Malta, as well as increased attention from international business and media means that regulators are being forced to reconsider.
Binance, the world’s largest cryptocurrency exchange is set to move to Malta, dubbed the “blockchain island” following a crackdown from the Chinese authorities.
Potential must be harnessed
Austria, the current holders of the EU rotating presidency has also asked questions about the lack of regulation, stating that “potential risks posed by crypt assets” need to be addressed whilst also allowing for the harnessing of their full potential.
Bruegel has however pointed out that blockchain regulating is tough because of their digital nature, but the businesses facilitating their sale, trade, and exchange should have tougher rules imposed on them.
Whilst the EU has updated its Anti-Money Laundering directive, this is unlikely to be implemented any time before 2020, meaning that the sector will remain at the regulatory mercy of each individual member state.
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