EU racing to regulate Bitcoin, cryptocurrencies as market explodes

  • Late June could bring new EU crypto-legislation
  • EU lawmakers seek global guidance on digital asset regulation
  • US dual attempt to regulate crypto launched in June

The three bodies involved in the negotiation of European Union rules on Bitcoin and other cryptocurrencies hope to end work on the markets in crypto-assets legislation by the end of June as pressure increases to protect investors in an imploding market.

The EU’s clumsy legislative machinery involves a “trilogy” between the European Commission, the European Parliament and the 27 member states. Negotiators met in mid-June and plan to meet again on June 30 to get the package ready by the end of France’s six-month rotation in the presidency, according to a report by Bloomberg.

NFTs Legislation in Flux

Among other things, negotiators have yet to decide whether to include non-fungal tokens (NFTs) in the legislation and whether to require crypto-asset providers to disclose energy consumption, due to the massive computing power required for mining and transactions.

The EU began working on MiCA in 2020 in an effort to draw up common rules on crypto for the bloc. As it has on privacy issues and high technology, the EU wants to take the lead in regulating digital assets worldwide.

EU seeks regulatory guidance

European Commissioner Mairead McGuinness last Friday called on all parties to reach a compromise on the rules and finalize them. The collapse of the Terra stablecoin in May, the halting of withdrawals by the Celsius Networkand concerns that Russia is using crypto-assets to evade sanctions have made the rules more urgent, she said.

Celsius Network says global sales of cryptocurrencies make it a challenge to normalize its operations, warning that it will take some time. Babel Finance, a crypto lender in Hong Kong, also suspended withdrawals and redemptions due to liquidity issues, and Hong Kong crypto exchange Hoo stopped transactions because withdrawals drained its funds.

Verena Ross, head of the European Security and Markets Authority, last month called for work on crypto-rules to be completed, saying she was waiting with “great impatience” for the parties to reach an agreement.

Crypto Firms Struggle To Hire Compliance Officers

Crypto firms are scrambling to appoint compliance officers while regulators prepare new rules or invent ways to apply existing rules to digital assets. The firms come to the realization that not only are rules inevitable, it can help keep the industry in a set of traps.

In the USAthe Securities and Exchange Commission dropped the ball on crypto-regulation, according to Commissioner Hester Peirce, who says the failure to adopt rules keeps her awake at night.

“We do not allow innovation to develop and experimentation to take place in a healthy way, and there are long-term consequences of that failure,” Peirce told CNBC at a blockchain summit in late May.

In early June, Senators Cynthia Lummis and Kirsten Gillibrand had a twofold bill to build a regulatory framework for the crypto markets. The Responsible Financial Innovation Act assigns regulatory authority over most digital asset locomotives to Commodity Futures Trading Commission.

Bitcoin, the leading speculative cryptocurrency, fell below $ 20,000 for the first time since November 2020, leaving investors vulnerable and regulators concerned not only about protecting them but maintaining financial stability and preventing financial crime .

Bitcoin Daily Price Chart: June 22, 2022

Source: IG

Fabio Panetta, executive board member of the European Central Bank, warned last month that the crypto market was now larger than the $ 1.3 trillion subprime mortgage market when it launched the 2008 financial crisis.

Regulators have already begun enforcing money laundering restrictions. The BitMex crypto platform was fined $ 100 million last year by U.S. regulators for failing to perform AML checks.

One of the most sophisticated European regulators, the UK Financial Conduct Authority, is awaiting legislation that extends its oversight of crypto firms beyond money laundering. So far, it has found only 33 firms he is willing to authorize.

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