Fifteen days ago, the large countries of the Eurozone, including Spain, alerted risks posed virtual currencies and called for “clear and strict rules” for crypto assets and cryptocurrencies such as Libra from Facebook, that raises so many doubts in governments like the French. An area to which the European Comission with the presentation of the first EU legislative proposal in this area, with which it aims to promote innovation, preserve financial stability, provide clarity and legal certainty to issuers, and protect investors.
To guarantee the consumer protection, the scope of the new regulations will be very broad. It will not only cover the issuing entities of cryptoactive, but to 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 hacks, as well as applying adequate supervisory 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 calls 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 of the authorities national as in the other cases. “They will be subject to more stringent requirements due to the specific challenges (they pose) to financial stability” with “stronger safeguards, also against fraud and money laundering,” explained the vice president. Valdis Dombrovskis.
Cryptocurrencies referenced to a single currency will be subject to the requirements of the proposal as well as 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 digital finance package to stimulate competitiveness and innovation that includes a digital finance strategy to improve data management, a retail payment strategy to facilitate transactions and make them more secure, and a new regulatory framework on operational resilience which aspires to ensure that all participants in the financial system have sufficient safeguard measures to mitigate cyber attacks and other risks.