The European Parliament will regulate cryptocurrencies?
Back on February 9, the two main factions of the European Parliament presented a plan to regulate the cryptocurrency market. More specifically, to extend existing regulations aimed at anti-money laundering and countering the financing of terrorism to all cryptocurrency transactions.
The vote on this project was supposed to take place on February 28, but was postponed. This is because the European Union had concerns about misunderstanding the new law. As Bitcoin.co.uk points out – there were interpretations in the digital asset community that indicated that the draft would ban, among other things, digging up cryptocurrencies.
At the time, the European Parliament was working to clarify the proof-of-work issue, in order to ensure accurate regulations and reduce the chances of misunderstandings due to the new law. This was termed as – MiCA, or Markets in Crypto-Assets. The work on this regulation has already started in 2020. However, now the topic is back, and it is because of the war in Ukraine.
The head of the ECB calls for the regulation of cryptocurrencies
Christine Lagarde – the head of the European Central Bank has long had plans for cryptocurrencies. I.e. she demands the regulation of this market – and, above all, to end the anonymity with which we associate digital assets. It is worth mentioning that the European Union is not against cryptocurrencies. The best proof of this is the European Investment Bank (EIB), which issued a €100 million bond on the Ethereum blockchain in May 2021.
However, their huge opponent is Christine Lagarde herself, who stated last year that cryptocurrencies ARE NOT currencies. What’s more – according to the head of the ECB, they are highly speculative, suspicious and high intensity in terms of energy consumption. Lagarde calls for not only regulation of cryptocurrencies, but also stablecoins, as well as other digital assets.
Nevertheless, the ECB chief herself indicates that the creation of a CBDC (or central bank digital currency) is needed. However, she would like the CBDC to function alongside fiat money, i.e. the euro, for example. Christine Lagarde is currently extremely active on the issue of regulation of cryptocurrencies, and she cites the war in Ukraine as the reason. According to some European politicians – cryptocurrencies can help Russians to circumvent sanctions.
However, it is worth noting that donations are flowing into Ukraine in the form of cryptocurrencies. What’s more – the Ukrainian government itself officially accepts them into the state wallets of BTC, ETH and USDT. Ukraine has already received $35 million in the aforementioned cryptocurrencies. Russia, on the other hand, has recently introduced a law regulating the cryptocurrency market, and not long ago there were rumors that the country would ban them altogether.
The war in Ukraine and cryptocurrencies
While there are some factions or politicians in the European Union who are pushing for the regulation of the cryptocurrency market, it is unclear what the law passed by the Parliament will ultimately look like. Stefan Berger – a member of the European Parliament’s Committee on Economic and Monetary Affairs – points out that the adoption of MiCA will mean a chance for the EU to set global standards.
According to him, strong support for MiCA is a signal from the European Parliament for a technology-neutral and innovation-friendly financial sector. The topic of regulation is starting to get more and more attention precisely because of the war in Ukraine. However, cryptocurrency experts such as Brad Garlinghouse (CEO of Ripple) indicate that Russia cannot use them to avoid global sanctions.
Garlinghouse points out that cryptocurrency exchanges or fintechs often work with banking partners who risk losing their license if a blacklisted person bypasses security measures. That’s where rules like KYC and AML came from, as well as the OFAC Act. As he states – his company is even obligated to NOT COOPERATE with sanctioned banks or countries that are restricted counterparties. The Ripple CEO adds that associating cryptocurrencies with criminals or ways to launder money is an outdated argument that doesn’t apply in today’s reality.
Moreover – although according to a Bloomberg report – Russians are expected to hold up to 12% of global cryptocurrency holdings, experts point out that Ukraine is much better suited for cryptocurrency adoption than Russia. This is shown by Chainalysis’ Global Crypto Adoption Index, which ranked Ukraine 4th when it comes to crypto transactions.
In addition, a 2021 report by The New York Times shows that Ukraine processes more cryptocurrency transactions per day than in the hryvnia. More than $150 million worth of cryptocurrency transactions are expected to take place in Ukraine daily. And the country itself legalized cryptocurrencies just a week before the war broke out. This made it possible to create state wallets that now accept donations from all over the world.