By Elizabeth Hearst
The European Union will establish a digital supervisory group that will oversee “significant” online currencies including Facebook’s Libra and Bitcoin.
Draft proposals seen by EURACTIV, detail that the European Commission will set up a supervisory group including national and European authorities in the coming weeks.
The document will detail how the EU will seek to crack down on the high volatility of cryptocurrencies and potential money laundering risks associated with the digital currencies.
French Finance Minister Bruno La Maire previously said that “we will not accept that Libra is transformed into a sovereign currency that can endanger financial stability”.
In July 2019, the Financial Action Task Force announced that countries across the world needed to improve their surveillance of cryptocurrencies to prevent scammers using the platform to launder funds.
Following the announcement, Simon Riondet, head of financial intelligence at Europol told Reuters that cryptocurrencies were being used to transfer money across borders and added: “We also have some investigation on the dark web in which the payments are made in cryptocurrencies… and they are switching it to more anonymised cryptocurrencies”.
Many legislators are concerned about digital currencies that are linked to sovereign currencies such as Facebook’s Libra, and are referred to as “stablecoins”. Regulators fear that their usage could destabilize the global economy, should they crash.
Jens Weidmann, Chief of Germany’s Central Bank, had previously said that these stablecoins could “undermine banks if they become widely used”.
The proposals come following two years of investigations and research, but EU officials told EURACTIV that the unveiling of Facebook’s Libra came as a “wake up call”. The draft states that the body will impose lighter requirements on low-risk cryptocurrencies, but will be more stringent on “significant e-money tokens” in terms of what they expect, their supervision and potential sanctions.
The supervisory body is expected to monitor a $350 Billion market and supervise more than 6,700 digital currencies. It is believed that cryptocurrency developers will be expected to produce a “white paper” document that will give buyers additional information about the currency and potential risks. These documents must be ratified by European and National regulators prior to them operating.
It’s expected that Facebook’s Libra will have to apply to become a credit institution or electronic money institution, thus facing more stringent regulatory requirements. These ‘significant e-money tokens’ will be under the supervision of the European Banking Authority, and will be assisted by the European Commission’s supervisory body.
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