European Union to Tighten Crypto Currency Regulations

European Union to Tighten Crypto Currency Regulations

This is the tenth in our series of articles looking at some of the topics to be discussed at our November 2018 conference, Beyond Borders: International Taxation into 2020. Book your early bird ticket HERE before it’s too late!

European Union finance ministers will meet on September 7th to discuss setting up more stringent regulations to apply to crypto currencies.

According to Bloomberg’s Alexander Weber and Boris Groendahl, the European Union will take a closer look at the many challenges posed by the growth in popularity of crypto currencies, including their “lack of transparency” and their “potential to be misused for money laundering, tax evasion and terrorist financing.”

Back in May, the European Union set Know Your Customer (KYC) rules for crypto currencies, essentially forcing crypto currency exchanges in the region to identify its users.

As reported by Reuters, in an effort to stem the use of virtual currencies for illicit financial activities, “one key novelty is a requirement for the dozens of European exchanges which trade in currencies such as bitcoin or ethereum, and the technology companies that store the money in so-called wallets, to carry out the same know-your-customer checks as ordinary banks.”

Furthermore, as part of this September 7th discussion, the European Union will seek to make the most out of the many new technologies that have been unleashed by the crypto world, particularly blockchain and initial coin offerings (ICOs).

The document that posited the EU’s position and which was studied by Bloomberg says that ICOs “have established an effective and efficient way to raise capital,” and Member States hope they can channel this technology to “integrate capital markets” in the region.

Additionally, this falls in line with the agreement signed back in April 2018 by 22 Member States establishing a Declaration on the Establishment of a European Blockchain Partnership.

At the time, Mariya Gabriel, the EU’s Commissioner for Digital Economy and Society, said: “In the future, all public services will use blockchain technology. Blockchain is a great opportunity for Europe and Member States to rethink their information systems, to promote user trust and the protection of personal data, to help create new business opportunities and to establish new areas of leadership, benefiting citizens, public services and companies. The Partnership launched today enables Member States to work together with the European Commission to turn the enormous potential of blockchain technology into better services for citizens.”

As part of this initiative, the EU plans on investing close to 300 million Euros to help harness the power of blockchain technology in the region.

EU Parliament Recommends Not Banning Crypto Currencies

EU Parliament Recommends Not Banning Crypto Currencies

This decision to tighten all relevant rules comes following a EU Parliament report urging the region to accept yet regulate crypto currencies.

More specifically, in July 2018, the EU Parliament’s Economic and Monetary Affairs Committee released a report in which it recommended Europe not to ban crypto currencies.

This report, penned by Marek Dabrowski and Lukasz Janikowski from the Center for Social and Economic Research, considers crypto or virtual currencies as a “contemporary form of private money,” and they recommend that Europe “should not ignore VCs, nor should they attempt to ban them.”

Crypto Table Europe

Last updated: March 2018

Furthermore, the report says, “The economists who attempt to dismiss the justifications for and importance of VCs, considering them as the inventions of ‘quacks and cranks’, a new incarnation of monetary utopia or mania, fraud, or simply as a convenient instrument for money laundering, are mistaken.”

Given crypto currencies’ global nature, Dabrowski and Janikowski consider it impossible to altogether ban them and suggest instead taxing them like any other financial assets and establishing European-wide regulations that would apply to everyone involved.

As reported by Bloomberg’s Weber and Groendahl, Europe has recently been impacted by the “wild price swings on virtual-currency markets” and an overall lack of protection for crypto investors.

What do you foresee for the crypto currency world in Europe? And do you have any questions you’d like to include for our crypto panelists in our November conference?

Submit them in the comments section below!