Recent Regulation in the EU
Right now the UK’s departure from the European Union – commonly called Brexit – dominates debate in the EU’s political capital of Brussels, Belgium. Beyond the back and forth between Brussels and London, a storm is also gathering surrounding the EU’s regulation of cryptocurrency.
Though the EU will not be prone to the temperamental approach to cryptocurrency seen by other governments around the world, the difficulty of establishing fair and effective regulation agreeable to all 28 member states cannot be overstated. Let’s look now at recent history, and what it may mean for the next future.
April saw a landmark vote as the European Parliament passed laws that would regulate cryptos across the continent. This served to ratify an original agreement struck back in December with the European Council. As part of the EU’s 5th version of its anti-money laundering directive (known as 5AMLD), this new agreement came with some real significance behind it – but ultimately the EU policy towards cryptos is still a work in progress. More recently, the EU sent a diametrically opposite message when it indicated that further regulation is unlikely.
The Difficulty of the Task
While the EU may seek to tighten the screws on the crypto industry to clamp down on money laundering and other crimes, given its size and scope the risk of a blanket policy smothering innovation and industry also looms large. Especially because, even after the introduction of 5AMLD, the difference in local legislation from one member state to the next can be significant.
The differences notwithstanding, there are areas of common ground to be found here. Many member states across the EU reacted with outrage following the revelations of the leaks of the Panama and Paradise Papers, which detailed the offshore tax minimization practices of many of Europe’s elite. While tax minimization is not always illegal, tax evasion is.
For Brussels, the rise of crypto as a financial force is interspersed with their desire to clamp down on avenues that would allow for more of what would otherwise be coming to governments to be rerouted elsewhere. Yet, traveling this path will require great precision, especially with a view to the future.
Brussels and Valletta
Ultimately nobody knows yet how big crypto will get. If they do achieve explosive growth and become sustainable to the point of rivaling or replacing fiat currency, the EU will have a whole new problem on its hands. In the meantime, a key area to watch will be Malta’s plans for its cryptocurrency expansion.
Right now, Valetta is bullish about its prospects to grow Malta into a cryptocurrency mega hub, but this is based upon the status quo seen in Brussels right now. Yet, while Brussels may have a long reach, they also know they must tread carefully when it comes to managing its member states.
The political damage done to the institution by the Greece fiasco, Brexit (even if the UK has done far more damage to itself), and the pesky broader tensions between Northern Europe and Southern Europe (especially the PIGS economy) is significant. Nobody is suggesting Brussels has an easy task, but critics of the EU’s alleged rigidity will watch closely the future of its crypto regulation, and how effectively it’s applied.