Stricter Regulations are coming to banks and crypto in the European Nation
EU being strict
The European Union (EU) is taking steps to implement stricter regulations for banks that have business dealings in cryptocurrencies. The European Parliament’s Economics and Monetary Affairs Committee recently approved a bundle of changes that will require banks to hold more capital in order to protect against potential losses from their crypto investments. The new rules will also require banks to disclose if they are exposed to cryptocurrencies. These changes, which still need to be approved by the European Parliament and EU finance ministers, are aimed at bringing European regulations in line with standards proposed by the Basel Committee on Banking Supervision last year.
The Basel Committee, which is a group of supervisory authorities from around the world, proposed that there should be limits on how much of a bank’s capital could be exposed to crypto assets, and laid out standards that are set to be implemented by the start of 2025. The Committee’s vote was welcomed by industry body the Association for Financial Markets in Europe (AFME), which said it was an important step in “EU implementation of the international Basel III reforms.”
The AFME, however, is concerned that tokenized securities, the blockchain-based digitization of the stock market that BlackRock CEO Larry Fink has called the “next generation” of the financial markets, could be hit by the regulations if the wording is not clarified. “More work is still needed on the crypto assets proposal to better define its scope to ensure tokenized securities are not captured,” said Caroline Liesegang, head of prudential regulation at AFME.
This is an understandable concern, as tokenized securities are a rapidly growing market, and a lack of clarity in the regulations could stifle innovation and growth in this area. The EU will need to tread carefully to ensure that the regulations are effective in protecting consumers and the financial system, while not stifling innovation and growth in the crypto and tokenized securities market.
EU relationship with crypto
The European Union (EU) has had a somewhat mixed approach to the regulation of crypto. While some EU countries have been more open to the use of crypto and blockchain technology, others have been more hesitant.
On one hand, some EU countries, such as Malta and Estonia, have taken a more pro-crypto stance, actively promoting the development and use of crypto and blockchain technology. Malta, for example, has become known as the “blockchain island” due to its favorable regulations for crypto and blockchain companies.
On the other hand, some EU countries, such as France and Germany, have been more cautious about the use of crypto, with stricter regulations and stricter enforcement of existing regulations. France, for example, has been particularly tough on crypto-related activities, with the French financial watchdog warning that crypto companies could be subject to stricter regulation.
The EU as a whole has been working on a regulatory framework for crypto and blockchain-related activities. The EU has been working on a set of regulations known as the “Fifth Anti-Money Laundering Directive” (5AMLD), which aims to combat money laundering and terrorist financing through the use of crypto. The 5AMLD came into effect in January 2020 and requires crypto exchanges and custodial wallet providers to register with national authorities and to implement strict know-your-customer (KYC) and anti-money laundering (AML) measures.
The EU has also been working on a framework for the regulation of stablecoins, which are crypto assets that are pegged to a fiat currency or other assets. The EU’s proposed framework for the regulation of stablecoins, known as the “Digital Finance Package”, aims to ensure that stablecoins are subject to the same regulations as other financial products and services, such as securities and payment services.
Overall, the EU has been working towards a more stable and secure crypto market. However, the approach to crypto regulation varies among EU countries, with some countries taking a more pro-crypto stance, while others have been more cautious. The EU will need to continue working to ensure that its regulations are effective in protecting consumers and the financial system, while not stifling innovation and growth in the crypto market. It will also need to work closely with other regions, such as the United States, to ensure that global regulations are consistent and effective in protecting consumers and the financial system.
More regions look for stability
The EU is not the only region looking to implement stricter regulations for crypto and blockchain-related activities. The United States is also considering new regulations for the crypto market, with the Securities and Exchange Commission (SEC) recently issuing a statement warning that many crypto exchanges may be operating in violation of federal securities laws. Other countries, such as Japan and South Korea, have also implemented stricter regulations for crypto exchanges to protect consumers and prevent money laundering and other illicit activities.
The EU’s decision to implement stricter regulations for banks that have business dealings in crypto is a positive step towards ensuring the stability and security of the financial system. The EU will need to ensure that the regulations are effective in protecting consumers and the financial system while not stifling innovation and growth in the crypto and tokenized securities market. The EU will also need to work closely with other regions, such as the United States, to ensure that global regulations are consistent and effective in protecting consumers and the financial system.