Cryptocurrencies in Europe

The general notion of cryptocurrencies in Europe denotes the processes of legislative regulation, distribution, circulation, and storage of cryptocurrencies in Europe. Different countries have their own approach to cryptocurrencies legalization, distribution, and storage. Mining of cryptocurrencies is permitted. Although the United Kingdom affirmed in 2020 that crypto assets are property, it has no cryptocurrency regulations and does not consider cryptocurrencies to be legal tender. In September 2021, European Securities and Markets Authority published a report on Trends, Risks and Vulnerabilities where crypto assets are considered a high-risked innovational financial technology. In March 2020, the Central Bank of France began to study the topic of CBDC, in May it sold securities for the digital euro, and in September 2020, France announced the launch of CBDC based on the Tezos blockchain. In July 2020, The Dutch Central Bank (DNB) said the euro system’s central bank digital currency (CBDC) should be more programmable than Bitcoin. In July 2021, the European Commission released a statement that would apply what is known as the travel rule to crypto transactions to make them more traceable. In 2014, The EBA issued a decision on virtual currencies, which included a list of more than 70 risks associated with its dissemination.

Also in the same year, ESMA released two statements on initial coin offerings (ICOs), one on investor risks and the other on the laws that apply to companies that participate in these offers. There is no income tax in this jurisdiction, therefore funds received through ICOs are not subject to it, and Bitcoin and altcoins are not subject to VAT. In Spain, there is no specific virtual currencies’ legislation, except for the law approved in July 2021 on preventing and fighting tax evasion. Estonia published its AML Bill as early as 2018. According to the Organization for Economic Cooperation and Development (OECD), Estonia’s tax policy is one of the most competitive in the world. In August 2020, the Ministry of Finance and the Ministry of Justice of Germany promulgated a bill to regulate electronic securities in the country (eWpG-E). The European Securities and Markets Authority (ESMA) published a study in 2017 on the use of distributed ledger technology (DLT) in securities markets. Also, it has officially launched a 2-year-long study on the creation of a Digital Euro and the various nuances that would involve. In 2018, The Financial Stability Board (FSB) released a study on the crypto asset market and its potential pathways for future financial stability concerns.

In 2018, the European Parliament released two reports about virtual currencies and central banks’ monetary policy. In 2020, the ECB released a report about stablecoins’ regulatory status. In 2019, ECB highlighted the paper series with a discussion about stability in crypto-assets. In September 2020, The European Commission has today adopted a new Digital Finance Package, including Digital Finance and Retail Payments Strategies, and legislative proposals on crypto-assets and digital resilience. In April 2023, the EU Parliament passed the Markets in Crypto Act (MiCA) unified legal framework for crypto-assets within the European Union. In September 2021, the Parliament of Ukraine passed a law to legalize cryptocurrency. In July 2021, The European Central Bank is launching a pilot project for the “digital euro”. In 2016, the European Central Bank issued an analysis of virtual currency schemes, acknowledging the potential advantages of virtual currencies. In 2013, the European Banking Authority (EBA) issued a public warning about the possible risks of virtual currencies. During the G7 meeting of July 2019 risks posed by global stablecoin projects were discussed. Kissler, Michael (July 2020). “Guidance on crypto assets and crypto custody under the recent amendment to the KWG”.

Bateman, Tom (2021-09-29). “‘Whales’ make Europe the world’s new cryptocurrency capital”. Bateman, Tom (2021-07-21). “The EU is making Bitcoin traceable, closing crypto loophole”. Germany continues implementing crypto into the national regulation. The FCA cited a failure to comply with know your customer laws (KYC), which track and prevent money laundering, as well as the high risk to customers, due to a lack of regulation and protection. Browne, Ryan. “EU lawmakers approve world’s first comprehensive framework for crypto regulation”. According to Chainalysis, Europe has the world’s largest crypto economy, collecting $1 trillion in the previous year, or 25% of all crypto activity worldwide. According to Chainalysis, Europe’s growth was largely driven by so-called “whales”, large institutional investors shifting enormous sums of cryptocurrency. There are some regulatory policy recommendations for EU states to follow in the course of cryptocurrency adoption and regulatory framework development that are given below in chronological order. In March 2022, the Financial Conduct Authority (FCA) declared that all cryptocurrency ATMs in the country were illegal and would need to be shut down. At the time, Coin ATM Radar listed 81 such ATMs in the country. FINMA, Eidgenössische Finanzmarktaufsicht. “FINMA publishes ‘stable coin’ guidelines”.

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