Odaily Frontline｜The European Commission will formulate strong regulatory rules for Libra

This article comes fromEURACTIV.com, original author: Jorge Valero

Odaily Translator |

Odaily Translator |

The European Commission will propose new rules later this year to create a "sound" market for encrypted assets, including stablecoins such as Facebook's Libra, in the EU, European Commissioner for Financial Services Valdis Dombrovskis said on Tuesday.

Crypto assets bring benefits to consumers and businesses by providing cheaper and faster payments. But regulators are trying to catch up to these fast-growing digital currency markets.

“A lack of legal certainty is often cited as a major obstacle to the development of a robust cryptoasset market in the EU,” Dombrovskis said at the Digital Finance Outreach conference.

To address this regulatory gap, the European Commission will introduce legislation early this autumn that will attempt to balance the need for rules to protect customers without hampering innovation in developing industries.

"I believe Europe is leading the way in terms of regulation," Dombrovskis said.

He added that some crypto assets are partially covered by current EU law, though the commission also intends to make some “adjustments to ensure they still apply.”

He also said that to fine-tune existing rules, the European Commission would create a "sandbox", a pilot framework with some regulatory flexibility for experimentation, "but well-framed and closely regulated".

For assets not currently covered by EU law, the European Commission will establish a specific regime and passport system for the encrypted asset market.

Dombrovskis explained, “The aim is to make sure that the risks are addressed and that investors and users have a clear understanding of the risks.”

Under this new regime, the rules will be proportional to the level of risk. Dombrovskis cautioned that lower-risk projects would face looser rules, while for global cryptocurrencies such as Libra, rules would be stricter given the challenges they could pose in terms of financial stability and monetary policy.

These cryptocurrency rules will be part of a new digital finance strategy to be announced in Europe later in 2020.

The goals of the strategy will be to deepen the single market for digital financial services, address barriers to scaling up start-ups in the sector, and make the most of digital identities.

The strategy will also promote the concept of "open finance", similar to the existing concept of "open banking", to support a data-driven financial sector.

The European Commission will also strengthen EU cybersecurity rules, proposing new standards for all financial institutions in early autumn to enhance their operational resilience.