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A recently leaked European Union (EU) document reveals that both cryptocurrency issuers and providers of related activities will have to make critical choices in the face of what industry experts describe as a “wave of regulatory obligations”.
The paper, entitled “Markets in Crypto-assets Regulation”, details how the EU wants to regulate crypto-assets, with a focus on stablecoins backed by currency.
A copy of the 167-page draft was obtained by XReg Consulting, a company specializing in digital asset regulations, who said in a comment that they expected the new regulations to “shake up the industry” both in the European Economic Area (EEA) and globally.
The companies concerned must “prepare for a wave of new regulatory requirements” and therefore make “important strategic decisions that will dictate the future success of their business,” the consulting firm said.
EURACTIV, a European media outlet, said the final version of the document should be presented “in the coming weeks”, making the EU the first major jurisdiction to regulate crypto-actives.
According to the EURACTIV article, stablecoins, referred to in the document as “asset-referenced tokens” or “e-money tokens,” seem to be of particular concern to the European regulator, which proposes much stricter oversight than for other crypto-actives.
Stablecoins that are considered “significant” will be subject to supervision by the European Banking Authority (EBA). The EBA will, in turn, have the power to conduct investigations, on-site inspections and impose fines of up to 5% of the issuer’s annual turnover, according to the EURACTIV article.
However, as far as its full applicability is concerned, the proposed rules apply to many more players than just issuers of stablecoins. Rather, it refers to a broadly defined group called “crypto-actives service providers” (CASPs) and “crypto-actives issuers”, which together cover anyone who offers crypto-actives to third parties.
And according to the document, anyone developing crypto-actives for the European market must produce a white paper that must be approved by national and European regulators before the issuer can begin to operate, a policy change that will undoubtedly be a major challenge for the industry.
Xreg Consulting stated that the proposed rules will harmonize cryptos regulations across the European Economic Area (EEA), and “will replace all national legal and regulatory regimes for crypto-actives related activities”.
“On an EEA-wide basis, this means that CASPs authorised in one Member State will have access to the single market by obtaining a passport for their services,” the firm added.
So far, issuers of crypto-actives have largely operated in a regulatory grey area at the global level, but it remains to be seen whether the major players in the sector will comply with the new regulations, and if not, what European regulators will be able to do about it.