The news about the European Commission (EC) leaked draft to propose an all-encompassing regulation for crypto-assets has begun playing out. Today, the EC has put forward a regulatory framework that sought to provide legal clarity on crypto-assets, especially stablecoins, while still ensuring the consumers’ protection and financial stability in the member states.
The European Commission on crypto-assets
Following the 168-page official draft proposal published by the European Commission on Thursday, the framework proposed came as a part of the Digital Finance package. As the EC explained, the package is a measure adopted to enable and support the potential of digital finance or a competitive EU financial sector, while still mitigating the risks.
About crypto-assets specifically, the EC recognized them as digital representations of values or rights, saying they can also serve as an access key to service, payments, or designed as financial instruments. For the crypto-assets already governed by the EU, they will remain subject under the existing legislation. However, a pilot regime was proposed for market infrastructures that wish to trade and settle transactions in financial instruments in crypto-asset form.
More stringent requirements for stablecoin issuers
Furthermore, the European Commission proposed a bespoke regime for stablecoins and other crypto-assets that were unregulated previously. The commission wrote:
The bespoke regime will introduce specific requirements on e-money tokens, significant e-money tokens, asset-referenced tokens and significant asset-referenced tokens in order to address the potential risks to financial stability and monetary policy transmission these can present. Finally, it will address market fragmentation issues arising from the different national approaches across the EU.
The European Commission is of the view that these crypto-assets, especially stablecoins, will possibly gain massive adoption, so the issuers in Europe will be subjected to more stringent requirements. Among other things, these requirements will be centered on their capital, custody of assets, and most importantly, and the rights of the investor.