Fifteen days ago, the large countries of the Eurozone, including Spain, warned of the risks posed by virtual currencies and called for “clear and strict rules” for crypto assets and cryptocurrencies such as Facebook’s Libra, which raises so many doubts in governments such as the French. An area to which the European Commission has launched this Thursday with the presentation of the first legislative proposal of the EU in this field, with which it seeks to promote innovation, preserve financial stability, provide clarity and legal certainty to issuers, and protect investors.
To ensure consumer protection, the scope of the new regulations will be very broad. It will not only cover crypto-asset issuers, but also all firms that offer related services: from platforms dedicated to safeguarding this type of virtual products to purchase and sale entities in exchange for money or through exchanges. These types of service providers will be required to have a physical presence in the EU and will have to receive prior authorization from the competent national authorities before starting their activity.
In addition, they will have to comply with certain capital requirements, governance standards, the obligation to separate their assets from those of their clients, equip themselves with technological measures to avoid the risks of theft and hacking, as well as apply adequate supervision measures to avoid market abuse. Cryptocurrency issuers will also be required to publish a kind of “white paper” including specific information such as conditions, rights, obligations and risks.
In the case of so-called stable cryptocurrencies, linked to values such as the euro or the dollar, the requirements for operating in the EU will be even more stringent and will be subject to the supervision of the European Banking Authority (EBA, for its acronym). in English) and not from national authorities as in the other cases. “They will be subject to more stringent requirements due to the specific challenges (they pose) for financial stability” with “stronger safeguards, also against fraud and money laundering,” explained Vice President Valdis Dombrovskis.
Cryptocurrencies referenced to a single currency will be subject to the requirements of the proposal as well as to the requirements and safeguards provided in the directive on electronic money. This means that they will have to be backed in a one-to-one ratio. In the event that they are referenced to more than one currency, the conditions will be even stricter. The issuer, for example, will have to maintain adequate liquidity agreements with the asset service providers that buy and sell the cryptocurrency, as well as payment guarantees. Buyers will in turn have the right to withdraw directly in the event of a significant change in value.
The proposal is part of a new package of measures on digital finance to stimulate competitiveness and innovation that includes a digital finance strategy to improve data management, a retail payments strategy to facilitate transactions and make them more secure, and a new regulatory framework on operational resilience that aims to ensure that all participants in the financial system have sufficient safeguards to mitigate cyberattacks and other risks.