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There is still no unified regulatory framework regarding cryptocurrencies in the [[European Union]]. However, various authorities within the EU have given a number of legal initiatives for creating the consensus on key issues of cryptocurrency distribution. Anti Money Laundering Directive 5 ([[AMLD5]]) is the primary standard for all the EU member states.<ref>{{Cite web|title=Anti-money laundering and countering the financing of terrorism|url=https://ec.europa.eu/info/business-economy-euro/banking-and-finance/financial-supervision-and-risk-management/anti-money-laundering-and-countering-financing-terrorism_en|url-status=live}}</ref>
There is still no unified regulatory framework regarding cryptocurrencies in the [[European Union]]. However, various authorities within the EU have given a number of legal initiatives for creating the consensus on key issues of cryptocurrency distribution.


= Legality of cryptocurrencies in Europe =
= Legality of cryptocurrencies in Europe =

Revision as of 21:16, 2 November 2021

There is still no unified regulatory framework regarding cryptocurrencies in the European Union. However, various authorities within the EU have given a number of legal initiatives for creating the consensus on key issues of cryptocurrency distribution.

Legality of cryptocurrencies in Europe

There are some regulatory policy recommendations for EU states to follow in the course of cryptocurrency adoption and regulatory framework development that are given below in chronological order.

In 2013, the European Banking Authority (EBA) issued a public warning about the possible risks of virtual currencies.[1]

In 2014, The EBA issued a decision on virtual currencies, which included a list of more than 70 risks associated with its dissemination.[2]

In 2016, the European Central Bank issued an analysis of virtual currency schemes, acknowledging the potential advantages of virtual currencies.[3]

The European Securities and Markets Authority (ESMA) published a study in 2017 on the use of distributed ledger technology (DLT) in securities markets.[4]

Also in the same year, ESMA released two statements on initial coin offerings (ICOs), one on investor risks and the other on the laws that apply to companies that participate in these offers. After that, the European Commission directed the EBA and ESMA to evaluate the applicability and appropriateness of the existing EU financial services regulatory framework to crypto assets.[5][6]

In 2018, the European Parliament released two reports about virtual currencies and central banks’ monetary policy.[7][8]

In 2018, The Financial Stability Board (FSB) released a study on the crypto asset market and its potential pathways for future financial stability concerns.[9]

During the G7 meeting of July 2019 risks posed by global stablecoin projects were discussed.[10]

FINMA, the Swiss financial authority, published a supplement to its ICO guidelines outlining how it treats so-called ‘stable coins’ under Swiss supervisory law.[11]

In 2019, ECB highlighted the paper series with a discussion about stability in crypto-assets.[12]

In September 2020, The European Commission has today adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience.[13]

In October 2020, the Financial Stability Board issued a report about regulation, supervision, and oversight of global stablecoin arrangements.[14] The FSB acknowledged that global stablecoins might disrupt bank funding and have risks for data security. The FSB recognized the necessity for international collaboration to regulate stablecoins.

In late 2019, the International Monetary Fund (IMF) provided recommendations for the regulation of crypto assets.[15]

In 2019, Financial Action Task Force (FATF) issued a Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers, advising member countries to assess the money-laundering risks associated with technological development.[16]

In 2020, the ECB released a report about stablecoins’ regulatory status.[17]

In 2020, the European Commission proposed a pilot regime for market infrastructures that wish to try to trade and settle transactions in financial instruments in crypto-asset form.[18][19]

In July 2021, The European Central Bank is launching a pilot project for the "digital euro". Also, it has officially launched a 2-year-long study on the creation of a Digital Euro and the various nuances that would involve.[20]

In July 2021, the European Commission released a statement that would apply what is known as the travel rule to crypto transactions to make them more traceable.[21][22]

In September 2021, European Securities and Markets Authority published a report on Trends, Risks and Vulnerabilities where crypto assets are considered a high-risked innovational financial technology.[23]

In September 2021, European Central Bank president Christine Lagarde claims that stablecoins need to be considered assets, and corresponding authorities should supervise their declared fixed exchange rates.[24]

Crypto turnover  

Europe will be the world's largest cryptocurrency economy by 2021, having received over €870 billion in cryptocurrencies in the previous year. With about €145 billion in bitcoin trade volume, the United Kingdom led the CNWE area. France, Germany, the Netherlands, and Spain came in second, third, and fourth, respectively.

According to Chainalysis, Europe's growth was largely driven by so-called "whales", large institutional investors shifting enormous sums of cryptocurrency.[25]

Different countries have their own approach to cryptocurrencies legalization, distribution, and storage. It’s important to mention some of the most prominent decisions of different states about stablecoins regulation.

Germany

Germany continues implementing crypto into the national regulation. First, they started with licensing crypto custody service providers. Now private funds are allowed to keep 20% of their investments in crypto.[26]

In August 2020, the Ministry of Finance and the Ministry of Justice of Germany promulgated a bill to regulate electronic securities in the country (eWpG-E).[27]

In May 2021, the German Federal Financial Supervisory Authority (BaFin) recognized cryptocurrencies as financial instruments.[28]

There are 178 Blockchain startups in Germany, including Bitwala, Worldcoin, Nuri, Naga, Finoa, Finlab, VividMoney, 1ich, etc.[29]

The only platform that directly connects with Fidor Bank AG in Munich is Bitcoin.de, established in 2011.[30]

United Kingdom

Although the United Kingdom affirmed in 2020 that crypto assets are property, it has no cryptocurrency regulations and does not consider cryptocurrencies to be legal tender.[31][32]

In the recent development, British authorities are exploring the possibility of creating a new digital currency, touted as ‘Britcoin”.[33]

The UK has recently seen a surge in the popularity of cryptocurrencies, signaling a new era of digital payment. Several companies and startups in the UK are now focusing on cryptocurrencies and blockchain as this is said to be the next big thing in the world of fintech.[34]

UK cryptocurrency startups include Koinly, Ziglu, Valforex, Celsius, Network, Elliptic, Mercuryo,  etc.[35]

Ukraine

In September 2021, the Parliament of Ukraine passed a law to legalize cryptocurrency. The law divided virtual currencies into secured and unsecured assets and establishes an obligation for crypto service providers to comply with anti-money laundering laws.[36]

The most known Ukrainian crypto startups included such companies as Kuna, Superorder, PlatoTrade, Wayforpay, Django Stars, Liqui, and others.[37]

The Netherlands

In July 2020, The Dutch Central Bank (DNB) said the euro system's central bank digital currency (CBDC) should be more programmable than Bitcoin.[38][39]

There are some crypto startups in the Netherlands, including Blockdata, Bitvavo, Bitstamp, Bux zero, and others.[40]

France

In March 2020, the Central Bank of France began to study the topic of CBDC, in May it sold securities for the digital euro, and in September 2020, France announced the launch of CBDC based on the Tezos blockchain.[41]

Estonia

Estonia published its AML Bill as early as 2018. According to the Organization for Economic Cooperation and Development (OECD), Estonia's tax policy is one of the most competitive in the world. There is no income tax in this jurisdiction, therefore funds received through ICOs are not subject to it, and Bitcoin and altcoins are not subject to VAT.[42][43][44]

Spain

In Spain, there is no specific virtual currencies' legislation, except for the law approved in July 2021 on preventing and fighting tax evasion.[45][46]

CBDC issue

In March 2019, the Institute and Faculty of Actuaries issued a report about understanding Central Bank Digital Currencies (CBDC).[47]

So far, 5 countries have implemented central bank digital currencies and 14 others are conducting test pilots. In total, 81 countries are considering the possibility of introducing CBDC  into their respective economies - 16 of these countries are in the development phase and 32 are in the research phase.[48]

For example, governments in Estonia, Germany, Norway, Sweden, Switzerland and others have issued statements on the upcoming issue of CBDC.[49][50][51][52][53]

The European Central Bank (ECB) and the European Commission services are jointly reviewing a broad range of policy, legal and technical questions relating to the possible introduction of a digital Euro. They are considering this in the context of their respective mandates and independence provided for in the Treaties.[54]

A joint statement by the European Commission and the ECB outlined their cooperation on a digital Euro.

Public opinion

The ECB issued a report on the findings of a three-month study of EU residents on the digital euro on April 14, 2021: Only 13% of EU residents are ready to utilize the digital euro, while 53% prefer cash payments, 34% prefer a mixed method, and 53% prefer a hybrid strategy.[55]

References

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  4. ^ "Report on Distributed Ledger Technology Applied to Securities Markets". www.esma.europa.eu. Retrieved 2021-11-01.
  5. ^ "ESMA highlights ICO risks for investors and firms". www.esma.europa.eu. Retrieved 2021-11-01.
  6. ^ eur-lex.europa.eu https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52020PC0593&from=EN. Retrieved 2021-11-01. {{cite web}}: Missing or empty |title= (help)
  7. ^ "Virtual currencies and central banks monetary policy: challenges ahead" (PDF).{{cite web}}: CS1 maint: url-status (link)
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  10. ^ Cœuré, Benoît (2019-07-18). "Update from the Chair of the G7 working group on stablecoins". {{cite journal}}: Cite journal requires |journal= (help)
  11. ^ FINMA, Eidgenössische Finanzmarktaufsicht. "FINMA publishes 'stable coin' guidelines". Eidgenössische Finanzmarktaufsicht FINMA. Retrieved 2021-11-01.
  12. ^ "Occasional Paper Series: In search for stability in crypto-assets: are stablecoins the solution?" (PDF).{{cite web}}: CS1 maint: url-status (link)
  13. ^ "Digital Finance Package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses".{{cite web}}: CS1 maint: url-status (link)
  14. ^ "Regulation, Supervision and Oversight of "Global Stablecoin" Arrangements: Final Report and High-Level Recommendations" (PDF).{{cite web}}: CS1 maint: url-status (link)
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  18. ^ "Procedure file" (PDF).{{cite web}}: CS1 maint: url-status (link)
  19. ^ "Proposal for a Regulation of the European Parliament and of the Council" (PDF).{{cite web}}: CS1 maint: url-status (link)
  20. ^ "European central bank officially announces 2-year-investigation to develop digital euro".{{cite web}}: CS1 maint: url-status (link)
  21. ^ Jones, Huw (2021-07-20). "EU to tighten rules on cryptoasset transfers". Reuters. Retrieved 2021-11-01.
  22. ^ Bateman, Tom (2021-07-21). "The EU is making Bitcoin traceable, closing crypto loophole". euronews. Retrieved 2021-11-01.
  23. ^ "ESMA Report on Trends, Risks and Vulnerabilities" (PDF).{{cite web}}: CS1 maint: url-status (link)
  24. ^ "Stablecoins are assets — not currencies, says ECB president". Cointelegraph. Retrieved 2021-11-01.
  25. ^ Bateman, Tom (2021-09-29). "'Whales' make Europe the world's new cryptocurrency capital". euronews. Retrieved 2021-11-02.
  26. ^ "Germany to Allow Institutional Funds to Hold up to 20% in Crypto". Bloomberg.com. 2021-07-30. Retrieved 2021-11-02.
  27. ^ "Germany: Electronic Securities Act Enters into Force". Library of Congress, Washington, D.C. 20540 USA. Retrieved 2021-11-02.
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  31. ^ "Crypto Regulations in the UK". ComplyAdvantage. Retrieved 2021-11-02.
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  35. ^ "List of top United Kingdom Cryptocurrency Companies - Crunchbase Hub Profile". Crunchbase. Retrieved 2021-11-02.
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  38. ^ "CBDC: what, why and how". www.dnb.nl. Retrieved 2021-11-02.
  39. ^ "Dutch National Bank to lead way in digital euro development". Finextra Research. 2020-05-21. Retrieved 2021-11-02.
  40. ^ "Blockchain Startups in Netherlands". tracxn.com. Retrieved 2021-11-02.
  41. ^ Insights, Ledger (2020-09-17). "French CBDC tests: SocGen uses Tezos blockchain". Ledger Insights - enterprise blockchain. Retrieved 2021-11-02.
  42. ^ "Money Laundering and Terrorist Financing Prevention Act – Riigi Teataja". www.riigiteataja.ee. Retrieved 2021-11-02.
  43. ^ "Interview with Adam Berker from Mercuryo On Crypto Regulatory Landscape". Retrieved 2021-11-02.
  44. ^ Pomerleau, Kyle (2015-11-06). "Estonia's Growth-Oriented Tax Code". Tax Foundation. Retrieved 2021-11-02.
  45. ^ "New Spanish bill aims to enable mortgage payments in crypto". Cointelegraph. Retrieved 2021-11-02.
  46. ^ "The Law Reviews - The Virtual Currency Regulation Review". thelawreviews.co.uk. Retrieved 2021-11-02.
  47. ^ "Understanding Central Bank Digital Currencies (CBDC)" (PDF). {{cite web}}: line feed character in |title= at position 35 (help)CS1 maint: url-status (link)
  48. ^ "Central Bank Digital Currency Tracker". Atlantic Council. Retrieved 2021-11-02.
  49. ^ Bank, European Central (2021-10-19). "Central bank digital currencies (CBDC)". {{cite journal}}: Cite journal requires |journal= (help)
  50. ^ "Estonia's central bank, ECB publish results of CBDC blockchain research".{{cite web}}: CS1 maint: url-status (link)
  51. ^ "German central bank makes case for blockchain settlement in CBDC debate". Finextra Research. 2021-03-25. Retrieved 2021-11-02.
  52. ^ "Norges Bank will test technical solutions for central bank digital currency". www.norges-bank.no. Retrieved 2021-11-02.
  53. ^ "Sweden moving forward in e-krona CBDC trials". Cointelegraph. Retrieved 2021-11-02.
  54. ^ "A digital euro".{{cite web}}: CS1 maint: url-status (link)
  55. ^ Reuters (2021-04-14). "Europeans want digital euro to be private, safe and cheap -ECB survey". Reuters. Retrieved 2021-11-02. {{cite news}}: |last= has generic name (help)
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