According to a Reuters report, the EU is looking to regulate cryptocurrencies by 2024 at the latest. The regulations will be targeted in the first place against stablecoins such as Libra, USDT or DAI. The EU wants to use blockchain technology to make fast and cheap cross-border transfers available.
Currently, approximately 78% of all payments inside the Eurozone are executed in cash. The EU wants to promote the use of digital payment methods. The importance of cashless payments has especially risen during the Corona pandemic.
According to a new legislative proposal, the current cryptocurrency regulations should be checked again, readjusted, and if needed expanded. Gaps in the current legislation will have to be closed.
“By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector,” the documents said. “It should also address the risks associated with these technologies.”Excerpt from EU documents
After Libra was announced last year, and Facebook recently launching its own Fin-tech company with “Facebook Financial”, politicians started looking more into stablecoins and their potential. Libra is meant to become a stable cryptocurrency developed under Facebook’s leadership. Multiple countries are working on launching their own central bank digital currency (CBDC), most prominently China. Brussels will need to adapt to this new technology if it wishes not to lose its competitive edge.
Important regulations will address Anti Money Laundering (AML) and identification (KYC). These regulations should be implemented with the next 4 years, in order to quickly and easily offer financial services to new customers.
“By 2024, the principle of passporting and a one-stop shop licensing should apply in all areas which hold strong potential for digital finance.”Excerpt from EU documents
Cryptocurrencies will carry important advantages
Currently, wire transfers take days to settle, often at high costs. Blockchain technology allows for quick and cheap payments over the internet. Especially the stablecoins are of high interest.
Instant payments built on blockchain technology have many use cases that go beyond traditional payments, especially fro physical and online payments, which are currently dominated by card payments (debit, credit, etc…).
There are always unsettling news roaming around when it comes to stablecoins. For example, the G20 affiliated Financial Stability Board (FSB) recommends a complete ban of stablecoins. Hopes remain that governments and banks alike can take the middle way approach, and not resort to extreme scenarios.