Mairead McGuiness, European commissioner for financial services, financial stability and capital markets union, called on regulators to adopt a global approach to regulate cryptocurrencies and suggested that Europe and the U.S. could work together to lead the way.
In an opinion paper published on Sunday (May 1) on The Hill, the Commissioner highlighted the executive order signed by U.S. President Joe Biden charting the way for the U.S. regulation of crypto assets and Europe’s own proposed legislation, Markets in Crypto Assets (MiCA).
“I believe that the EU and the U.S. can together lead the way on a shared international approach to regulating crypto. Together, we can enable innovation in finance, while protecting consumers and maintaining financial stability,” said McGuiness.
But the commissioner quickly turned to the “significant risks” that cryptocurrency poses and the need for coordinated supervision, for financial stability to investor or consumer protection, or market abuses such as insider trading.
Given the decentralized nature of some cryptocurrency assets and the difficulties in enforcing the upcoming rules on some of these assets, the commissioner called for an international collaboration to collect and exchange information. She also proposed a global agreement on cryptocurrency to ensure that “no product remains unregulated.” Interestingly, MiCA applies only to certain cryptocurrency assets and coin issuers, and in particular to stablecoins, but nonfungible tokens and other decentralized products may fall outside its reach.
Finally, the commissioner also suggested that cryptocurrency ecosystems should fully integrate environmental considerations. She pointed to Europe as an example, which is funding initiatives to make blockchain more green. Environmental concerns almost led the EU Parliament to vote on a draft of MiCA that could have banned proof-of-word cryptocurrency mining, like bitcoin. The final draft removed this risk but still contains some provisions to take into account sustainable considerations, although it pushes back any obligations to 2025.
Central bank digital currencies (CBDCs) are the other side of the cryptocurrency coin. Digital currencies are stablecoins developed and issued by central banks. McGuiness said that the Commission is ready to propose legislation if the European Central Bank (ECB) wants to launch a retail CBDC.
Since the ECB is leading the CBDC charge, the role of the Commission in the development of a digital euro is minimal. However, the Commission is the only institution that can propose new legislation in Europe, and this may be needed if a new currency is launched alongside euro banknotes and coins.
On April 5, the Commission launched a consultation to gather information about the digital currency. This consultation will also provide valuable information to the EU department led by McGuiness that may shape the upcoming modification of the Payment Service Directive 2.
CBDCs may be subject to a more lenient regulatory environment than private stablecoins. This may already be seen in the proposed MiCA regulation where private stablecoins, especially those of significant importance, will be subject to additional requirements and supervision by the European Banking Authority (EBA), while public digital currencies may be exempted.
Additionally, Commissioner McGuiness also suggested in an interview that a digital euro won’t face money laundering checks as strict as those currently planned for regular cryptocurrencies. The commissioner could be referring to new legislation, on which the EU Parliament voted on March 31, that will oblige cryptocurrency firms such as exchanges to obtain, hold and submit information for every single transaction, regardless of its size.