04 Sep 2018 Samantha McLauren
Crypto Regulation and Transparency Set on the EU Ministers Radar
Vienna (Austria) will gather the EU ministers on the 7th September, whose agenda will be first focused on discussing the lack of transparency in the community and the risks associated with cryptocurrency usage. Cryptocurrency adoption is currently affected by EU’s concerns related to usage of cryptocurrencies for money laundering, tax evasion and potential financing of terrorist networks and activities.
Investors were warned about Initial Coin Offerings by The European Securities and Markets Authority. The difficulties come with the lack of knowledge and unregulated financial activities. The ESMA alerted customers to use unregulated exchanges with caution. If they suffer a loss, the EU law would not cover it.
Besides the previous warnings, ICOs have positive qualities and they are an effective way to boost capital. Also, they could improve the integration of capital markets in the European Union.
On July 9th, the fifth Anti-Money Laundering Directive was established by the EU Authorities, which main purpose is to regulate digital currencies. Furthermore, strict transparency requirements were formulated to inspect anonymous payments with prepaid cards.
Digital currency exchange platforms will be overseen in case of hidden money laundering or financing terrorist networks.
The European Securities and Market Authority (ESMA) increased the requirements needed for Contracts for Differences (CFD) in digital currencies. According to the regulation, investors must possess enough funds to pay for a minimum of half of the contract value at its start, which changes the cryptocurrency CFDs leverage from 5:1 to 2:1 at the time of opening.
The EU concerns are shared by the governments of countries as crypto rules are tightening not only in Europe. Regulators all around the globe are rewriting laws. In China for example, there was a massive crackdown, whereas in Japan the government enacted an exchange-licensing regime.
The swinging prices of the cryptocurrencies is an issue that many countries believe the governments should try to interfere on. Another important concern of governments is that in many locations investors rights and interests are not protected by any regulatory agencies.