Digital Wild West: New rules for digital currencies

So far, there is no clear policy line for digital currencies. The EU Commission does not want to exclude them from the European market, but wants to regulate them strictly in the future.

In the coming weeks, the legislation developed to regulate digital currencies will be presented. The European Commission aims to protect consumers and investors as well as legal certainty and financial stability. This is set out in a ten-page working paper sent to all Member States. New rules are to be created that relate to the settlement, custody and investment of crypto assets.

Supervision and regulation of financial stability

The payment of interest to customers of the currencies would be prohibited. Companies will also have to be established in the EU.

Regulations should be set according to the relevance of the currency and thus the risk involved. The EU banking authority will supervise correspondingly larger providers, while smaller providers of crypto-currencies will be overlooked by national supervisors.

Trading of the digital currency will be tested in a secure area. The so-called sandbox principle will be used to conduct financial transactions with the new technologies in a separate and secure area, like in a sandbox at a children’s playground.

RULES ARE WELCOME – BUT TOO LATE

The Commission’s move is welcome, but clearly too late, said Markus Ferber, EPP Group spokesman in the EU Parliament. “A clear regulatory line has been missing until now, and that has turned the virtual currency market into the Wild West.” There are currently discussions about possible regulations for a separate European digital currency. Talks on this were initiated in connection with Facebook’s digital currency Libra, which is to be launched on the market this year.

Image source: iStock / metamorworks