Since its inception, countries in the European Union have played an active role in the cryptocurrency industry. The EU recently published a new study to make sure that members of the cryptocurrency industry do not utilize any of the loopholes in the written law.
The study covered several topics in the industry ranging from stablecoins to AML issues in the world of digital assets. According to the key points mentioned in the study, assets such as stablecoins and token-based fundraising need to come under the purview of the law.
The report was titled ‘Crypto-assets: Key developments, regulatory concerns and responses’ looked at the issues in the industry and how it can be rectified. Authors of the report claimed that cryptocurrencies can be used to convert illegally obtained capital in to clean cash. This money laundering technique has become a major thorn in the side of regulators, with many countries complaining of rapid capital surges.
Members of the EU further opined that there were several blind spots in the digital asset industry and the sooner they are rectified, the better. An excerpt from the report said:
“Newly mined coins are by definition ‘clean’, so if someone (e.g., a bank) is willing to convert them into fiat currency or other crypto-assets, the resulting funds are also clean. A first regulatory step could be to try to map the use of this technique and subsequently, if it effectively proves an important blind spot, to consider appropriate countermeasures.”
The EU suggested that regulators need to broaden the scope of the definition of virtual assets by including parameters such as security tokens. Another recommendation put forth by the EU was related to cryptocurrency exchanges. The body believed that crypto to crypto exchanges as well as financial services providers in the industry need to be surveyed. Cryptocurrency mining and miners were the other concerns of the EU.
The report said that anyone with a powerful computer could begin mining cryptocurrencies, which would also include criminal actors. It continued:
“A first regulatory step could be to try to map the use of this technique and subsequently if it effectively proves an important blind spot, to consider appropriate counter measures. In addition, and in view of the cross-border nature of crypto-assets and their misuse, the introduction of a European AML watchdog could have various benefits, especially if it is staffed with highly trained IT personnel capable of analyzing the AML/CFT risks new technologies bring.”
Stablecoins was another pain point for the EU. The report indicated that most stablecoins have a local footprint that can be used to track the sender and receiver. Several countries have entered the cryptocurrency sphere in recent years, with many developing their own Central Bank Digital Currencies [CBDC]. Christine Lagarde, the president of the ECB had said that the body was assessing the value of CBDCs in daily value.
