The issue of cryptocurrency regulation was once again brought to light in a recent speech by European Commission’s Executive Vice President on social economics, Valdis Dombrovskis.
Many people believe the European Union’s recent drive to develop a public digital currency is in relation to Facebook’s Libra project plans. However, earlier this month, the Bank of International Settlements (BIS) assured the public that plans to develop a central bank digital currency (CBDC) are not in reaction to “private sector stablecoins”.
“CBDC issuance is not so much a reaction to cryptocurrencies and private sector ‘stablecoin’ proposals,” stated the BIS, “but rather a focused technological effort by central banks to pursue several public policy objectives at once.”
The recent speech seems heavily focused on the regulation of stablecoins, many of which remain largely ungoverned by EU law. In the speech, Dombrovskis blames developmental problems in the crypto space on the lack of clear regulation.
“Lack of legal certainty is often cited as the main barrier to developing a sound crypto-asset market in the EU,” Dombrovskis said.
He went on to assure listeners that the new regulations will support innovation and help drive better development in the digital assets sector. Despite the previous assertations that Libra was not considered a threat, Dombrovskis mentioned the need for stricter regulations on a “global stablecoin”; one can only assume he means Libra.
Despite huge interest in other stablecoin projects like Tether (USDT), Libra has brought particular attention in the EU as it is not intended to be pegged to a specific currency. This raises questions of what authority would regulate it and exactly how much power it would wield should it explode in popularity. Some governments felt it could destabilize the global economy and facilitate money laundering. Several EU countries, including its major economic powerhouses Germany and France, have previously threatened to block the launch of the digital currency.
In April, the Geneva-based Libra Association announced it will peg the stablecoin to individual national currencies and allow oversight from global watchdogs. The change in plans appears to be an attempt to appeal to regulators in the hope to secure approval from Swiss financial watchdog FINMA.
The project, which was planned to launch this month, appears to be distancing itself from Facebook due to a lack of public trust following the Cambridge Analytica scandal a few years ago. Following further delays on the issuance of a payments system license from FINMA, Libra has now rescheduled its launch date to November this year.
The wider cryptocurrency market has recently faced a downturn following an impressive recovery after the economic effects of the COVID-19 pandemic. The price of leading cryptocurrency Bitcoin (BTC) has fallen by 10 percent over the past few weeks, dropping from over $10,000 per coin to its current position just above $9,000.