Europe's concerns about the use of cryptocurrency to launder money and fund terror are about to be addressed. This is after the European Parliament submitted a policy brief last week dealing with crypto regulation in the region.
The document will be put to vote on March 14 after due discussion by the European Parliament Committee. This is according to a tweet from committee member Stefan Berger. He also mentioned that the policy would not include any content banning Proof-of-Work (PoW) mining activities.
Blockchains like Bitcoin use the PoW mechanism, which rewards miners for devoting their computing power to transaction processing. PoW operations consume massive computing power, and mining stations are known to consume the power equivalent of a data centre.
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Media reports suggest that six countries – Germany, Spain, Italy, Austria, Luxembourg and the Netherlands - are leading the charge on the formulation of crypto regulation in Europe. The nations are collectively working together to set up an oversight committee for crypto when it comes to Anti-Money Laundering (AML) laws. Here’s how the regulations may affect the crypto market:
AML Watchdog
A centralised anti-money laundering organisation in the EU has long been on the cards. Talks of one date back to July 2021, when Reuters reported that the European Commission was considering a new AML authority that would be at the centre of all crypto regulations. While the details are still sketchy, it looks like this is finally going to come to fruition.
The new task force will aim to keep a close eye on crypto service providers, financial institutions, and banks that engage in cross-border transactions. And while the finalisation of the move is yet to be confirmed, the crypto community is already rife with speculation.
"Negotiations very much remain ongoing around its remit, and as part of these negotiations — presumably given the growing awareness of the uses of and risks around crypto — there are understood to be specific discussions taking place about making the agency’s role in regulating crypto and related institutions a key part of its mandate, potentially even spelling out such matters in its foundational principles,” Christian Toms, Partner at law firm Brown Rudnick’s arm in London, told CoinTelegraph.
One entity at the helm
Europe, just like the US, does not rely on a single governing body to oversee all financial functions. It is more like a web of agencies, each with its own expertise yet connected with all the other agencies. Experts believe that such a structure warrants the need for a central governing body and do not necessarily deem it as a hostile move.
"Although the 5th Anti-Money Laundering Directive, which entered into force on January 10th, 2020, and since has been fully transposed by almost all member states, includes within its scope crypto service providers (notably, exchanges and custodian wallet providers) as obliged entities,
Added centralisation in a decentralised economy
The establishment of a law-enforcing authority will not only usher in centralisation but will also lead to improved clarity on crypto regulations in the region. The crypto community is eagerly anticipating thoroughly ironed out details on the new regulations, and the new central entity will play a key role in providing them with this information. Experts do not expect member nations of the EU to take any stance that contrasts the opinion of the majority.
"The monitoring activities and Anti-Money Laundering/Counter-Terrorist Financing rules across the EU will be uniformised up and consolidated.
CBDC and digital currency projects
The European Union has been exploring the possibility of introducing digital Euro for a while now. On February 9, 2022, Mairead McGuinness, European Union Commissioner for Financial Services, announced that a bill outlining the development and release of the digital Euro could be expected by early 2023. The European Central Bank (ECB) has been tinkering with designs and underlying systems that will drive the project and are targeting 2025 as the launch year for the digital Euro.
To surmise, the global adoption of crypto is ever-growing, and industry-leading organisations are setting up processes to leverage blockchain technology. The European Union is expected to take a firm stance on cryptocurrencies to eliminate/limit crypto crimes in the region. At the same time, the crypto ecosystem will have to evolve and better manage identity verification as well as transparency – the two aspects that are under the scanner all the time.
(Edited by : Jomy Jos Pullokaran)
First Published: Mar 14, 2022 9:21 PM IST
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