The European Union has launched a public consultation on an EU framework for crypto asset markets.
The EU Commission is working on a strategy to promote digital finance in Europe. This looks at the deepening of the single market for digital financial services, a more data-driven financial sector and an innovation-friendly regulatory framework.
The public consultation, and a separate parallel consultation on digital operational resilience, are first steps for the commission to prepare potential initiatives.
The commission in the past has confirmed a policy interest in developing and promoting blockchain technology across the EU.
The consultation defines crypto assets as digital assets that may depend on cryptography and exist on a distributed ledger.
In its 2018 FinTech Action Plan, the commission mandated the European Banking Authority and the European Securities and Markets Authority to assess the applicability and suitability of the existing financial services regulatory framework to crypto assets.
While some crypto assets fall within the scope of EU legislation, effectively applying it to these assets is not always straightforward, the consultation document said. “Moreover, there are provisions in existing EU legislation that may inhibit the use of certain technologies, including [distributed ledger technology]. At the same time, EBA and ESMA have pointed out that most crypto assets are outside the scope of EU legislation and hence are not subject to provisions on consumer and investor protection and market integrity, among others.”
With regard to stablecoins, which attempt to tie the value of a digital asset to a fiat currency or a commodity, the EU document quoted a G-7 report that found that if these types of coins became more accepted and reached a global scale, “they would raise additional challenges in terms of financial stability, monetary policy transmission and monetary sovereignty”.
The EU Commission said it is considering a proportionate common regulatory approach for crypto assets that are not covered by EU legislation to address consumer and investor protection, and market integrity concerns.