Posted 2 years ago | by Ben Armstrong
EU Sees Regulations for Digital Assets as Positive
Recently, two unofficial EU documents which had originally been scheduled to be published this September were leaked. They disclosed a plan by the European Union to regulate digital assets – including blockchain and crypto.
According to the European Commission, the new crypto framework will encourage the application of blockchain in general, with the aim to facilitate non-cash payment and cross-border transactions. It is planned to be enacted sometime in the next five years.
This plan is announced in the context of the pandemic and is designed to urge people to switch to digital payments. Cash was still the dominant payment method among European nations, making up 78% of all transactions in the region – although these statistics may be inaccurate.
The EU is Working on Wider Regulations
The documents claimed that an inclusive framework for blockchain, Distributed Ledger Technology (DLT) and crypto is being drafted to replace current vague and inefficient regulations.
By 2024, the new proposed law, so-called the EU Regulation on Markets in Crypto Assets (MiCA), would come into effect and enhance the role of digital currencies and payments in financial sector. At the same time, the draft also pointed out inherent issues and risks of the technology.
To create a united legal environment that harmonizes crypto, the rules will consolidate the definitions for blockchain-related terms, for example, what is e-money or what are defined as an asset-backed token.
More Digital Assets Could Hit the Markets
With the new regs, many types of crypto assets, including crypto or stablecoins are facing an opportunity to become compliant with EU regs, which may bring new assets to the marketplace.
However, the EU may decide to attempt to create regulations for actual crypto platforms – like Bitcoin. Not only is this basically impossible – it would be terrible for crypto businesses in the EU. Like anything in the digital economy, a decentralized currency doesn't need a government to exist.
If the EU goes the way of China – and decides that it will only allow digital payment platforms that it can control to be used legally – it will destroy its competitiveness in the digital economy. It also may push nations like Switzerland further away from the EU – which is bad for the EU in the medium-term.
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