European Commission officially proposes regulatory framework for crypto-assets

[TrevorS]

European Commission officially proposes regulatory framework for crypto-assets and stablecoins

The European Commission has today officially proposed a regulatory framework for crypto-assets and stablecoins after a leaked draft proposal went viral last week.

The 168-page official draft proposal (provisional), published Thursday, highlights the need for a "sound" legal framework, clearly defining the regulatory treatment of all crypto-assets that are not covered by existing EU financial services legislation.

Crypto assets, especially stablecoins, have the potential to become widely accepted, said the commission. Hence, they would be subject to "more stringent requirements" regarding capital, investor rights, and supervision. The proposal is in line with the leaked version from last week.

The commission has today proposed a "bespoke" regime for crypto-assets and stablecoins. "The bespoke regime for crypto-assets will ensure a high level of consumer and investor protection and market integrity, by regulating the main activities related to crypto-assets," said the commission. The main activities include such as crypto exchange and wallet services.

https://www.theblockcrypto.com/post/78713/european-commission-official-proposal-regulation-crypto-assets-stablecoins

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[DooMAD]

The 168-page official draft proposal (provisional), published Thursday, highlights the need for a "sound" legal framework, clearly defining the regulatory treatment of all crypto-assets that are not covered by existing EU financial services legislation.

I'm definitely not reading all 168 pages, but the fact that it states clearly on page 1:

At the same time, the EBA and ESMA underlined that – beyond EU legislation aimed at combating money laundering and terrorism financing – most crypto-assets fall outside the scope of EU financial services legislation and therefore are not subject to provisions on consumer and investor protection and market integrity

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection. 

In essence, protocols can't lie.  Companies can (and often do).

[rexxarofmoknathal]

Seeing this move by the European Commission is huge news and at the same time expecting news! We all agree that in order to achieve widespread crypto adoption regulations need to be in place to ensure safety of users and their assets.

I think it is about time officials treat this as a necessary matter for continued economical and technological growth and think about ways to monitor some of these crypto activities. Overall, this is a great step forward.

[avikz]

European Commission officially proposes regulatory framework for crypto-assets and stablecoins

The European Commission has today officially proposed a regulatory framework for crypto-assets and stablecoins after a leaked draft proposal went viral last week.

The 168-page official draft proposal (provisional), published Thursday, highlights the need for a "sound" legal framework, clearly defining the regulatory treatment of all crypto-assets that are not covered by existing EU financial services legislation.

Crypto assets, especially stablecoins, have the potential to become widely accepted, said the commission. Hence, they would be subject to "more stringent requirements" regarding capital, investor rights, and supervision. The proposal is in line with the leaked version from last week.

The commission has today proposed a "bespoke" regime for crypto-assets and stablecoins. "The bespoke regime for crypto-assets will ensure a high level of consumer and investor protection and market integrity, by regulating the main activities related to crypto-assets," said the commission. The main activities include such as crypto exchange and wallet services.

https://www.theblockcrypto.com/post/78713/european-commission-official-proposal-regulation-crypto-assets-stablecoins

This is just a proposal I believe and not yet made to become a law. However, I believe a legal framework will definitely help in widespread adoption of cryptocurrencies in European region. Once the framework is passed as a law, it will encourage the big players in the market to accept cryptocurrencies as their payment method.

Having no framework is as dangerous as having a ban because it only confuses the masses and the businesses. Hope something positive will come out from this proposal!

[so98nn]

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection.

In essence, protocols can't lie.  Companies can (and often do).

Exactly, this is gonna hamper the stablecoins the most. It is pointless to putforth regulations on bitcoin or any framework associated with it. They just can't control the borderless assets ! Unlike the stablecoins which will have fiat regulations imposed on them and any trade that happens or in a holding will be more or less fiat currency! So that goes to centralised framework.

This will definitely have positive impact on the investors but could be unhappy movement for those who thought they will hide their taxes and also earn plenty of good interest rates through stablecoin holdings. Since lot of people do think it's better to put money in them rather than getting low % in the savings account.

But such regulations will now put them in ambiguity unless they dont have any problems with exposed investment.

[electronicash]

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection.

In essence, protocols can't lie.  Companies can (and often do).

Exactly, this is gonna hamper the stablecoins the most. It is pointless to putforth regulations on bitcoin or any framework associated with it. They just can't control the borderless assets ! Unlike the stablecoins which will have fiat regulations imposed on them and any trade that happens or in a holding will be more or less fiat currency! So that goes to centralised framework.

This will definitely have positive impact on the investors but could be unhappy movement for those who thought they will hide their taxes and also earn plenty of good interest rates through stablecoin holdings. Since lot of people do think it's better to put money in them rather than getting low % in the savings account.

But such regulations will now put them in ambiguity unless they dont have any problems with exposed investment.

they can make the company who created the stablecoins be accountable. there is nothing more to check on BTC.
there was a youtube channel i have watched just recently which is related to this regulatory framework which in order for it to be regulated, traders will have to trade their BTC to stablecoins first before cashing out to fiat. this is sort of what he said in that video but its a centralized framework for sure.

[hulla]

The European Commission have be on this issue since last year, the important part is that they dont see crypto currency as a threat to their economy and I love the fact that President Ursula and the committee involve took some steps to understand cryptocurrencies opportunities and the risk it poses and provides adequate support.
Meanwhile, this regulatory framework should have been published since last year if not for the pandemic problem and it good they don't change their decision about crypto.

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection.

In essence, protocols can't lie.  Companies can (and often do).

Exactly, this is gonna hamper the stablecoins the most. It is pointless to putforth regulations on bitcoin or any framework associated with it. They just can't control the borderless assets ! Unlike the stablecoins which will have fiat regulations imposed on them and any trade that happens or in a holding will be more or less fiat currency! So that goes to centralised framework.

This will definitely have positive impact on the investors but could be unhappy movement for those who thought they will hide their taxes and also earn plenty of good interest rates through stablecoin holdings. Since lot of people do think it's better to put money in them rather than getting low % in the savings account.

But such regulations will now put them in ambiguity unless they dont have any problems with exposed investment.

they can make the company who created the stablecoins be accountable. there is nothing more to check on BTC.
there was a youtube channel i have watched just recently which is related to this regulatory framework which in order for it to be regulated, traders will have to trade their BTC to stablecoins first before cashing out to fiat. this is sort of what he said in that video but its a centralized framework for sure.

Although, i havent finish reading the framework cause it a long list but I want you to know that some Youtube video can misleading and I sill advise you to read the list by yourself.

[hatshepsut93]

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection. 

In essence, protocols can't lie.  Companies can (and often do).

Maybe they would love to have influence over Bitcoin, but they realize they can't do anything to it, even if they try to pressure the developers. But they can pretty effectively regulate Bitcoin's ecosystem if they regulate exchanges and other centralized services, since 95% of traffic comes through them, while decentralized alternatives are still not popular, and they gain users very slowly. If people keep using Bitcoin like they use fiat money - by giving it to trusted third parties, then Bitcoin really doesn't challenge governments or banks.

[amishmanish]

The objectives sections gives a clearer view of the intention here. The theme seems to be adoption of blockchain based fund raising so that European developers for innovation. They seem to have accepted that there is some "innovation" possible through the ICO route. How much of this is true in reality is open for us to see. This has rarely been the case till now.

The objectives specifically mention ICOs as a source of fund raising. Apart from this, the stablecoin regimes seem to have taken center stage in place of cryptocurrencies. What is quite notable as well as preposterous is that the report does not mention "Bitcoin" or "cryptocurrency". The term being used is "crypto-asset". What does everyone think this means? Not mentioning bitcoin is a sign of acceptance or a sign of confidence that it no longer makes any difference?

The tone of the proposal though is overall welcoming of the potential of "crypto-assets" to raise funding for blockchain innovation.

[pakhitheboss]

The 168-page official draft proposal (provisional), published Thursday, highlights the need for a "sound" legal framework, clearly defining the regulatory treatment of all crypto-assets that are not covered by existing EU financial services legislation.

I'm definitely not reading all 168 pages, but the fact that it states clearly on page 1:

At the same time, the EBA and ESMA underlined that – beyond EU legislation aimed at combating money laundering and terrorism financing – most crypto-assets fall outside the scope of EU financial services legislation and therefore are not subject to provisions on consumer and investor protection and market integrity

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection. 

In essence, protocols can't lie.  Companies can (and often do).

Why would they only go after stable coin and not all crypto assets? If they are only focusing on stable coins then this regulation means nothing at all. There will be other clauses that would indirectly also look into other cryptocurrencies activities

[DooMAD]

I'm definitely not reading all 168 pages, but the fact that it states clearly on page 1:

At the same time, the EBA and ESMA underlined that – beyond EU legislation aimed at combating money laundering and terrorism financing – most crypto-assets fall outside the scope of EU financial services legislation and therefore are not subject to provisions on consumer and investor protection and market integrity

appears to imply that they have no plans to attempt to regulate protocols like Bitcoin, aside from the usual AML stuff.  The focus will definitely be on the stablecoins that claim to be backed by fiat or other assets, because this is the part that requires trust.  Trust can be abused, therefore requiring regulation around consumer protection. 

In essence, protocols can't lie.  Companies can (and often do).

Why would they only go after stable coin and not all crypto assets? If they are only focusing on stable coins then this regulation means nothing at all. There will be other clauses that would indirectly also look into other cryptocurrencies activities

I'm pretty sure when they say it's "outside their scope", that loosely translates to "we couldn't even if we wanted to".  There's no way for them to regulate Bitcoin in the same way they can regulate a stablecoin.

Think of it this way.  They've already got regulations for custodians like exchanges and webwallets.  Regulators can help look after your consumer rights and enforce legislation upon those companies when they misbehave.  The part they've now realised they are missing is that they don't have sufficient regulations for companies that claim "our digital asset is backed by X amount of $/€/¥/etc and will be pegged 1:1 to those assets".  And, just to be abundantly clear, that's what a stablecoin generally is:  a company making a promise and you have to trust them to keep that promise.  People can buy those tokens believing that the fiat money is there.  But if said company are lying and the funds aren't really there, it could be difficult for regulators to act.  So they want to bring in this legislation to help with that. 

Bitcoin, on the other hand, is completely different.  Bitcoin doesn't make claims about being backed by other assets.  There's no company involved who regulators can hunt down and force them to pay out compensation in the unlikely event something somehow went horribly wrong with the protocol.  Regulators are totally powerless in that situation.  They know there's no point in trying to enforce some regulations that wouldn't actually help them in practice.  It would be a waste of their time to even try.  So it's "outside their scope".

[kryptqnick]

It seems to me that the EU crypto regulation is already pretty swift, and additional regulation of cryptocurrencies is likely to make it all more strict and probably impose taxes or something. To get an idea on what's the case now, Wikipedia says the following:

The European Union has passed no specific legislation relative to the status of bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.

VAT/GST and other taxes (such as income tax) still apply to transactions made using bitcoins for goods and services. [3]:European Union
....
According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors.[7]:5 Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.[8]

The European Central Bank classifies bitcoin as a convertible decentralized virtual currency.[7]:6 In July 2014 the European Banking Authority advised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.[9]

So this huge document, I hope, is indeed focused on the separate problem of regulating stablecoins. And frankly, I wish they'd regulate the hell out of them. Because while everyone realizes that BTC is volatile and the price can drop significantly over a short period of time, many people seem to trust stable coins, relying on the price remaining the same over time, while in reality a stable coin might collapse if it turns out it's not backed up the way it's supposed to be.

[bbc.reporter]

Crypto assets, especially stablecoins, have the potential to become widely accepted, said the commission. Hence, they would be subject to "more stringent requirements" regarding capital, investor rights, and supervision. The proposal is in line with the leaked version from last week.

The commission has today proposed a "bespoke" regime for crypto-assets and stablecoins. "The bespoke regime for crypto-assets will ensure a high level of consumer and investor protection and market integrity, by regulating the main activities related to crypto-assets," said the commission. The main activities include such as crypto exchange and wallet services.

https://www.theblockcrypto.com/post/78713/european-commission-official-proposal-regulation-crypto-assets-stablecoins

Consumer and investor protection might be another phrase for we the government want to limit how much cryptocoins you could own. The more poor you are, the lesser amount you are allowed to buy from an exchange.

The transformation of the cryptospace begins.

[DooMAD]

Expect in the future that crypto will merge with the current financial system. And it will create a new, more advanced system.

I'm not expecting any banks to launch their own stablecoin.  I could be wrong, since I haven't read it all, but I don't think this new legislation opens up that many new avenues for European banks to start offering crypto-related services.  And even if it did, they'd likely find it difficult to attract crypto-enthusiasts, who are often quite skeptical of traditional finance, to any such products they might launch.

[AmoreJaz]

It seems to me that the EU crypto regulation is already pretty swift, and additional regulation of cryptocurrencies is likely to make it all more strict and probably impose taxes or something. To get an idea on what's the case now, Wikipedia says the following:

The European Union has passed no specific legislation relative to the status of bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin.

VAT/GST and other taxes (such as income tax) still apply to transactions made using bitcoins for goods and services. [3]:European Union
....
According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors.[7]:5 Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.[8]

The European Central Bank classifies bitcoin as a convertible decentralized virtual currency.[7]:6 In July 2014 the European Banking Authority advised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.[9]

So this huge document, I hope, is indeed focused on the separate problem of regulating stablecoins. And frankly, I wish they'd regulate the hell out of them. Because while everyone realizes that BTC is volatile and the price can drop significantly over a short period of time, many people seem to trust stable coins, relying on the price remaining the same over time, while in reality a stable coin might collapse if it turns out it's not backed up the way it's supposed to be.

that's the usual dilemma when it comes to stablecoins. about the absolute truth how they are being backed, or are they really backed by the assets they are claiming to have? because these stablecoins can give statement that they have these assets to back the numbers, but when problem arises, thats the time we will discover they dont have those assets as claimed.
but this development, EU having regulatory framework for crypto assets is a very welcome progress.

[microsurfer]

Is this draft friendly or not? I always think about the worst cases then new regulation is coming

[pixie85]

The regulatory framework? What exactly do they mean? Do they want to control crypto in Europe? Do they think they can handle it?

It's always about money and power.

Whatever the EU does it's to either give them more authority over something or make them get their share from it. Usually it's both.

[DooMAD]

The regulatory framework? What exactly do they mean? Do they want to control crypto in Europe? Do they think they can handle it?

It's always about money and power.

Whatever the EU does it's to either give them more authority over something or make them get their share from it. Usually it's both.

That sounds a little dramatic.  I'm all for nation states being less powerful and intrusive, but at the same time, stablecoins are a ticking timebomb that will only get worse if something isn't done to make them less shady.  How many more scams do you really want to encourage?  Literally anyone can claim that their new token is backed by fiat, but if they're lying, the token is worthless.  It's a modern day alternative to counterfeiting.  You don't even have to make the effort to make illegal copies of banknotes, you just create a crypto token and say it represents money that doesn't even exist. 

[pixie85]

The regulatory framework? What exactly do they mean? Do they want to control crypto in Europe? Do they think they can handle it?

It's always about money and power.

Whatever the EU does it's to either give them more authority over something or make them get their share from it. Usually it's both.

That sounds a little dramatic.  I'm all for nation states being less powerful and intrusive, but at the same time, stablecoins are a ticking timebomb that will only get worse if something isn't done to make them less shady.  How many more scams do you really want to encourage?  Literally anyone can claim that their new token is backed by fiat, but if they're lying, the token is worthless.  It's a modern day alternative to counterfeiting.  You don't even have to make the effort to make illegal copies of banknotes, you just create a crypto token and say it represents money that doesn't even exist.  

Did I say anything that isn't true?

I know it's not always pure doom and gloom but how do you think they're going to determine which coin is good or bad? They'll ask everyone to apply for licenses and get money from it while having them all submit before their authority.

I don't like stablecoins but the EU is trying to regulate something they don't understand.

Nothing good is going to come out of this.

Does this mean that they are going to control crypto? Or is this regulation created for a different purpose?

Don't worry about it yet. They begun to work on this in the end of 2019 and it's going to take at least another year before the process is complete.

[MCobian]

For me this is positive news, with the European commission officially making a regulatory proposal for crypro assets.
So many European countries will accept crypto, because legality is more guaranteed. I hope that this proposed regulatory
framework will have no obstacles in realization. But I believe this European commission does not fully understand crypto,
so it could be a problem in the future if the European Commission did regulate something that they themselves didn't understand.