The European Union is preparing new rules for the issuance and trade of cryptocurrency in the Eurozone. This can be concluded from a leaked document in the hands of Coindesk.
Spoiler: cryptocurrency's will fall under the umbrella term "financial instrument". This is also the formal name of shares, bonds or derivatives.
But alternative investments in real estate or precious metals were also covered by that definition.
European Union and Cryptocurrency's
Proposed, it is a concept plan, so it can still be done in all directions. In addition, those involved do not expect these rules to be laid down by law before 2022.
The 168 page document (PDF) is called Markets in Crypto-Assets (MiCA) and aims to provide the industry with more certainty about the legal status of this asset class.
In any case, the approach is: this broad asset class is bound by the same rules as other "financial instruments", such as securities or commodities. It must also be in line with existing legislation. What is called the Markets in Financial Instruments Directive (MiFID) in Europe.
It can be inferred from this that, once entered, it can have major consequences for projects or companies that issue a crypto coin, token or stablecoin. But brokers, exchanges, funds or advisers must also take extra rules into account.
It largely corresponds to what the Financial Action Task Force (FATF) calls a virtual asset service provider (VASP).
No Bitcoin
The policymakers assume a broad definition of cryptocurrency's: cryptocurrency, security tokens, stablecoins, it all falls under that umbrella.
But which rules apply can differ per type of cryptocurrency, that much is clear.
Europe especially wants to legalize stablecoins, which they define as an "asset-referenced token or an" e-money token ".
Siân Jones, senior partner at XReg Consulting, explains,
“A stablecoin that is based on a basket of fiat currency, gold or other cryptocurrencies can be classified as an asset reference token.
But a currency that can be expressed in various fiat currencies is seen as e-money. An example of this is the latest version of the Libra. This will fall within existing e-money legislation. But asset-referenced tokens are bound by extra rules. ”
Stablecoins
The draft plan is in line with the desire of a handful of European finance ministers to come up with new rules for stablecoins as soon as possible. "Our" minister Wopke Hoekstra (CDA) also argues for this.
A stablecoin is mainly a replacement for the US dollar within the Bitcoin market. The largest in the industry is Tether (USDT). There is more than 10 billion USDT on the market. Obviously, the authorities want to target USDT.
An exchange like Binance relies in part on the BTC-USDT trading pair, the most popular on the market.
Not everyone finds credible that the EU also wants to stimulate innovation with this.
"Many will question that," said Jones, who refers, among other things, to the rise of decentral finance. The Lightning Network, Bitcoin's bottom layer for fast payments, can also be classified under this.
Bitcoin
It is remarkable that the word "bitcoin" does not appear in the document, which is nevertheless the largest crypto currency in the market.
But it is also the ecosystem around Bitcoin that can be affected by new rules, and not Bitcoin itself. This technology has no legal entity, point of contact or office.
This distinguishes BTC from all other projects that do have a central company, foundation or project team behind them.
Good to know further: the plan will not be laid down in European laws before 2022. Since it concerns European legislation, the rules are directly applicable without national implementation.