Valdis Dombrovskis, Executive Vice President of the European Commission for An Economy that Works for People.
BERND VON JUTRCZENKA | AFP | Getty Images
The European Commission on Thursday put forward plans to regulate crypto-assets in what will be its first ever attempt to oversee the nascent technology.
The executive arm of the EU has said that “the future of finance is digital” but that it’s important to mitigate “any potential risks.”
The new legislation wants to reduce these risks for investors, while also giving legal certainty to those issuing these assets.
One of the aims of the new legislation is for the EU to reduce “market fragmentation” in this space, European Commission Executive Vice President Valdis Dombrovskis told CNBC exclusively on Thursday, mentioning that many digital finance providers are only working within one member nation.
The new plan will mean that crypto-asset companies authorized by one of the 27 EU countries will be able to provide its services across all the other member states.
At the same time, there will be tougher rules on firms that issue so-called “stablecoins.” These are virtual tokens that aim to hold their value against certain assets — typically fiat currencies, like the dollar — to avoid the volatility found in cryptocurrencies like bitcoin. But they’ve garnered controversy in the past due to concerns over whether issuers have the required reserves to back them.
The new rules are sure to have implications for libra, the digital project announced by Facebook last year. Facebook’s initial vision for libra would have seen it backed by a reserve of multiple currencies, but the company has since changed tack following a backlash from regulators, who were worried it could disrupt the financial system.
However, it may take more than one year before these proposals from the EU are implemented.
“The legislative process will take time, at least a year, probably longer, depending how much priority will be given by both member states and the European Parliament,” Dombrovskis told CNBC.
The latest proposal will have to be approved by EU governments and the European Parliament, the EU’s only directly-elected chamber, before becoming law.
‘Not closing the doors to UK financing’
The Commission on Thursday also presented plans to develop capital markets within the bloc. The so-called Capital Markets Union aims to make access to capital easier across the 27 EU nations. It has been a dream of previous administrations in Brussels, but they have struggled to boost cross-border investments.
“Capital Markets Union as a project predates Brexit, but Brexit and the fact the EU’s largest financial center is leaving the single market means that we had new urgency for actually moving ahead with the capital markets union,” Dombrovskis told CNBC.
The U.K. is home to the largest financial center in Europe, the City of London. However, with the U.K.’s departure from the EU earlier this year and with a transition period ending in December, the EU will no longer be able to claim that it houses the biggest financial hub on the continent.
However, Dombvskis said that the EU’s latest plan was not “closing our doors to the financing from the U.K. or the United States.”
Among the latest measures, the EU wants to support more cross-border investments, make insolvency rules more harmonized across the 27 nations, and make regulation more consistent. This set of legislation will also have to be approved by European lawmakers and governments before being officially adopted.
—CNBC’s Ryan Browne contributed to this article.