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Due to the active development of cryptocurrencies in Europe and other jurisdictions around the world legislators are working hard to update the regulatory framework for virtual currencies. Particular attention is paid to the regulation of stablecoins in the EU, as it is widely believed that the proliferation of stablecoins could lead to new risks associated with money laundering and terrorist financing.

If you are planning to register a crypto company in Germany or any other member state of the European Union, then this blog post may be of interest to you.

EU regulation of virtual currencies  

When carrying out cryptoactivities in the European Union, it is important to keep in mind that control over this type of activity will be intensified in the near future. Especially what stablecoins is concerned - a strange hybrid and one of the most controversial and least understood cryptocurrencies, but they are important for the future of the new Internet economy. Stablecoins and the companies behind them will comply with global standards for cryptocurrencies and traditional assets.

To date, the implementation of the global regime of surveillance of stablecoins is insisted on by such regulators as:

  • International Organization of Securities Commissions;
  • European Commission;
  • G7 Stablecoin Working Group, and a number of other reputable organizations.

The regulators have expressed concern about how stable coins can be used for illegal purposes.

Stablecoin problem

The proliferation of stablecoins could have serious consequences for global efforts to curb money laundering and terrorist financing, the FATF said. Other serious challenges include:

  1. Lack of legal certainty regarding the handling of stablecoins and existing regulatory aspects;
  2. Weak oversight of transactions with such cryptocurrencies in the event of global spread.

Concerns that arise from the lack of global regulation of stablecoin in the EU, Asia, and other regions are mainly related to monetary policy and financial stability of countries.

For your info: 

FATF is an organization responsible for developing international standards for combating money laundering and criminal financing.

The organization defines stablecoins as a type of cryptocurrency that aims to maintain a stable value relative to a particular asset. Several digital assets meet the criteria for stablecoins -  Libra from Facebook, Tether, USD Coin and Paxos.

Recently, the G20 commissioned the FATF to prepare a report on stablecoins. The report focuses on:

  • Threats

If you intend to register a cryptocurrency exchange in the EU, it is worth considering the properties of stablecoin, namely the ability to quickly exchange between various virtual assets. This creates room for manipulation and allows for large-scale distribution of illicit funds in record time.

The degree of materialization of these risks depends on stablecoin schemes, the mass introduction of such cryptocurrencies, as well as the timely adoption of mitigation measures.

  • Regulatory standards update 

Standards for the regulation of stablecoins in Europe are already being revised and this process will continue. 

Conclusion

FATF has tightened requirements for the cryptocurrency industry, and businesses and governments were obliged to implement the new recommendations by June 2020. The organization will soon publish a new guide to stablecoins. The document will describe in more detail how AML measures will be taken against stablecoins, which will be important for those interested in registering a cryptocurrency exchange in the UK, Luxembourg, or any other EU country.

If you have any questions about the regulation of cryptocurrencies in Europe in connection with the above information, please get in touch by filling out a special form below. Our experienced legal professionals are ready to advise you and provide assistance in registering a cryptocompany in Luxembourg and other EU countries.