Bruegel: EU And G20 Recommended To Use Common Regulatory Framework For Cryptocurrencies


A report written for the Austrian Presidency of the Council of the EU for the ECOFIN meeting hosted by EU finance ministers and central bank governors argues that the EU and G20 need to adopt a common regulatory framework on how to deal with cryptocurrencies.

Also included in the report is a proposal that the common approach will help EU states scrutinize the distribution of new digital units to investors and how trading eventually occurs.

The Bruegel, a think-tank based in Brussels, argues in the report that there is the need for an EU-level regulation of cryptocurrency exchanges.

In addition, it believes that the Initial Coin Offering (ICO) industry lacks strict oversight. As such, the sector should have clear rules of engagement to help mitigate potential risks.

According to the think-tank, clearer rules will allow the region to properly exploit both the ICO industry’s potential and that of the underlying blockchain technology.

Reuters has reported that the document will be presented to the EU finance ministers during a Vienna conference scheduled for this Friday and Saturday.

EU concerns over Crypto

It should be noted that EU authorities have for a long time adopted the “watch and learn” approach, leading to a scenario where there hasn’t really been a push for comprehensive regulation of the industry.

Much of this outcome is due to the relatively small market and reach of cryptocurrency and related businesses. Even when the market has expanded in recent years, the relatively low percentage of BTC/EUR trade has meant that authorities weren’t overly concerned about regulations.

Recent developments have, however, forced the EU to take note. Concerns about the market’s extremely high volatility and the potential for increased fraud and money laundering activities means that regulators have gotten worried.

Another development that sees EU regulators on the lookout is the rapid expansion of cryptocurrency exchange businesses into Europe.

The report notes that many crypto exchanges have looked to expand into Europe in recent months, especially into blockchain-friendly Malta. It is an area that needs to be monitored.

For example, the world’s largest cryptocurrency exchange Binance shifted its headquarters to the tiny EU member state due to regulatory crackdowns in China and Japan.

The scenario exacerbates the above concerns, and the whole matter topples over with the huge interest citizens in EU countries are having in ICOs. At the moment, the ICO market in Europe accounts for 30 percent of global interest.

Regulating businesses is easier, Bitcoin Not so

The concerns have seen a number of proposals aimed at ensuring there is increased regulatory oversight. Calls for changing the regulations to address potential risks have come from various sectors of the EU.

There have been calls to monitor crypto assets like Bitcoin, but Bruegel believes that regulating bitcoin is not easy due to its virtual nature. However, the researchers have suggested that it is much easier to regulate entities like exchanges.

Such crypto-related businesses can be subjected to stricter regulations, including the KYC and AML disclosures.

Exchanges or platforms that fail to fulfill these requirements face a ban, suggests the Brussels-based think-tank. Its report cites China’s ban on ICOs and the fact that “mining farms can be forbidden” if they flout rules.

The EU has new anti-money laundering regulations that target exchanges and which will come into full effect by 2020. At the moment, the mandate to regulate platforms falls under the jurisdiction of individual member states.

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