The European Union is preparing a new cryptocurrency regime that could include stricter requirements for âglobal stablecoinâ projects such as Libra.
The blocâs lead economics minister, Valdis Dombrovskis â or to give him his full title, the European Unionâs Executive Vice President of the European Commission for An Economy that Works for People â said Europe had to seize the opportunity to become one of the main rule-makers for digital finance.
âThis is a good chance for Europe to strengthen its international standing and to become a global standard-setter, with European companies leading new technologies for digital finance,â he said during a speech at the Digital Finance Outreach 2020 earlier this week.
And the first test case, Dombrovskis said, would be cryptocurrencies.
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Although some cryptos, such as security tokens, are pretty well covered by European law, whole bundles of them, most notably stablecoins, remain entirely unregulated.
âLack of legal certainty is often cited as the main barrier to developing a sound crypto-asset market in the EU,â Dombrovskis said.
Some EU members have taken matters into their own hands, which damages market integration and makes it difficult for companies to operate across the whole trading bloc.
A new regulatory regime for cryptocurrency will not only cover unregulated digital assets, but it will also consolidate and homogenize existing standards across the continent, Dombrovskis said.
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Set to be unveiled later this year, Dombrovskis, who was formerly the prime minister of Latvia, didnât give much away on what the future regime might look like, although he emphasized that it would support and stimulate innovation.
A pilot scheme would allow regulators to provide a space for new experimental solutions to be monitored and observed, he said.
While Dombrovskisâ speech contained few specifics, he did say that the EU was particularly keen to bring stricter rules on any project deemed to be a âglobal stablecoin.â
What exactly Dombrovskis means by âglobal stablecoinâ isnât immediately clear. However, it appears one of the key components is that itâs used instead of traditional fiat currencies and can facilitate a greater number of transactions that cross national borders.
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That might be an inference to initiatives such as Facebooksâ Libra. Stablecoins, possibly like Libra, that operate on a global scale can âraise additional challenges,â Dombrovskis said â they can disrupt financial and monetary stability.
âOverall, our approach will be proportionate and relate to the level of risk. That means lighter rules for less risky projects,â Dombrovskis concluded. In the case of global stablecoins, such as Libra, âtheir potentially systemic role [means] our rules will be stronger.â