EU Cryptocurrency Regulation
In the European Union, there are separate bodies for the development of the legislative framework, on the basis of the developed directives, individual countries adapt the internal legal framework, or apply these directives as they are.
In the European Union, separate directives have been adopted to regulate the cryptocurrency market:
- European Parliament and Council Directive 2015/849 (4th AML Directive, 4AMLD)
- European Parliament and Council Directive 2018/843 (5th AML Directive, 5AMLD)
Which is the basis for the regulation of virtual values throughout the European Union
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Today, the word “blockchain” is on everybody’s lips. It has become something of an international buzzword in recent years, bringing with it a whole new set of opportunities and challenges. Perhaps the most noteworthy of these challenges is the question of how to regulate this exciting new technology that could change our lives forever. Fortunately, Europe has taken a clear stance on regulating blockchain and its related technologies in general. Unlike many other jurisdictions, EU member states have passed laws explicitly allowing businesses to trade digital tokens as well as create them using specific Know Your Customer (KYC) processes. Moreover, certain countries have also created special licenses for crypto exchanges so that they can operate more easily and transparently in their jurisdiction.
EU Legislation on Cryptocurrencies
One of the first steps in assessing EU cryptocurrency regulation is to understand its approach to cryptocurrencies themselves. While some countries have only approved specific blockchain applications, others have taken a far more general approach to the regulation of cryptocurrencies. Two such countries are France and Germany, which have explicitly stated that cryptocurrencies are not recognized as real currencies. This means that anyone who uses them to purchase goods and services runs the risk of penalties and fines. In this sense, EU legislation on cryptocurrencies is still in its formative stages and could change quite dramatically in the next couple of years.
Which European Countries Have Approved Blockchain Licenses?
While there is still no EU-wide regulations for the creation and trading of cryptocurrencies, there are certain EU jurisdictions that have developed specific blockchain licenses. In Malta, for example, a company can apply to become a Distributed Ledger Technology (DLT) service provider. This license is a great option for start-ups that want to provide blockchain-based services to other businesses. Meanwhile, in Estonia you can apply for a license as a “digital identity end-user,” which is a great option for businesses that want to use blockchain technology to authenticate their own employees.
EU Regulations for Crypto Exchanges
While there are no EU regulations on the creation of new cryptocurrencies, there are certain EU regulations that relate to crypto exchanges, which are the platforms through which cryptocurrencies are traded. For example, in France, many cryptocurrency exchanges are required to obtain a special license from the Autorité des marchés financiers (AMF) since they are classified as “services of investment intermediation.” Similarly, in the UK, exchanges are required to obtain a license from the Financial Conduct Authority (FCA). And in Germany, exchanges are required to obtain a license from the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).