- The European Financial Sector aims for holistic and risk-adequate supervision of the crypto business models.
- The newly elected German government said that innovation doesn’t come at the cost of affecting the stability of the traditional financial market.
The new German government has decided to take a pro-crypto stand in its coalition, a move that seeks to create a level playing field between “innovative business models” and traditional finance. The three German parties, who are looking to take the reins from December this year, have agreed to the coalition deal this week.
These three parties include left-leaning Social Democrats (SDP), the right-friendly Free Democrats (FDP), and the Green Party. The 177-page agreement published earlier this week on Wednesday, November 24, notes that the coalition seeks a new “dynamic in relation to the opportunities and risks from new financial innovations”. This includes blockchain businesses and crypto-assets. The agreement further adds:
We are making European financial market supervisory law fit for digitization and for complex group structures in order to ensure holistic and risk-adequate supervision of new business models, We need joint European supervision for the crypto sector. We oblige crypto asset service providers to consistently identify the beneficial owners.
The document also adds that the EU supervisory authority should take care of the traditional financial sector and simultaneously assure that there’s no misuse of cryptocurrencies for illicit activities like money laundering and terror financing.
An accommodative stand to crypto
As we are seeing, political parties and governments institutions are developing an accommodative stand for cryptocurrencies. Crypto has also turned into a new battleground for politicians to sway voters.
Apart from Germany, the European Council has initiated pro-crypto measures. It has added two more proposals namely the ‘Regulation on Markets in Crypto Assets (MiCA) framework and the ‘Digital Operational Resilience Act’ (DORA).
The European Commission had initially drafted MICA for the first time last September 2020. It also seeks to create a regulatory framework for cryptocurrencies. The framework takes into account the potential of crypto-assets and supports innovation in the space.
If the framework gets approval from the European Parliament, then crypto assets issuers will have to face more stringent regulatory norms. However, utility tokens and non-fungible tokens (NFTs) will still fall outside the scope of regulation.
A Reddit post from “BelgianPolictics” referred to this progressive regulatory proposal as the “most important one to date for the entire crypto industry”. The handle further added:
These rules will have to be followed by every entity operating in the European Union. However, because of the ‘Brussels Effect,’ there is a very good chance these rules will become international standards in the end. While everyone is focused on the US and China, the EU is casually leading the way.
It will be interesting to see how the EU approaches crypto regulations going ahead. For now, the wind seems to be turning in favor of crypto investors.