Business

Erik Gibbs

Crypto is here to stay, but classification is needed, EU leader says

The European Union (EU) is expected to introduce regulations for the cryptocurrency industry within the next couple of months. It had previously announced that it would have some type of framework in place by August, but had to push back the timetable due to the intricacies of the crypto ecosystem. The union recognizes the value of digital currencies and understands that it is now becoming an integral part of the landscape. This belief was reinforced by recent comments of the European Commission Vice President, Valdis Dombrovskis, who stated that crypto assets are “here to stay.”

Dombrovskis was speaking at a meeting held by the Economic and Financial Affairs Council in Vienna when he made his remarks. He added that, in spite of the “recent turbulence” in the crypto markets, the industry “continues to grow.” He stressed that the EU will allocate resources to “categorize and classify” crypto assets this year and to determine if existing financial regulations in the EU are sufficient to cover digital currencies, or if new regulations will be needed.

The European Commission is already working with European Supervisory Authorities to create “regulatory mapping” of digital currencies and other crypto assets with the goal of providing a solid foundation for the status of the assets. That mapping will also be used to advance the space and help it mature in accordance with global guidelines.

Dombrovskis also touched on initial coin offerings (ICO) during his speech, providing support for the initiatives as a “viable form of alternative financing.” He pointed out the $6 billion accumulated through ICOs last year, adding that the amount could be substantially higher by the end of this year.

The commissioner also touched upon some of the risks that have been associated with crypto—money laundering, fraud, market integrity and investor protection, to name a few. He suggested that the EU, as well as regulators in other jurisdictions, need to continue to monitor the industry and work closely with partners in the G20 and at the Financial Stability Board (FSB).

The FSB recently asserted that cryptocurrency assets are not a threat to global financial stability. However, it added that the market growth is substantial enough that in-depth monitoring is warranted.

Regulations and clarification are seen by some as a deterrent to future crypto growth. However, as has been seen on numerous occasions in traditional financial markets, regulations can actually help the industry expand, is it gives investors a greater amount of confidence to enter the space.

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