For years, digital currencies like Bitcoin have been used on a large scale for illicit purposes. According to studies, almost half of Bitcoin’s revenues can be attributed to activities such as money laundering or the trade in illegal goods such as drugs, weapons, protected animals and plants, even child pornography. Yet Bitcoin is only the most popular representative of the more than 5,000 existing so-called “crypto-assets”. A significant proportion of these are proven to be fraudulent, depriving investors of their real savings. At the same time, digital currencies and crypto-assets with the underlying blockchain technology offer great opportunities for transparent, open and less costly financial markets. Nevertheless, European legislators have not dared to strictly regulate Bitcoin and co. in recent years. It is therefore a long overdue breach of taboo when the European Parliament now calls for the creation of a binding and comprehensive legal framework.
With a so-called “legislative initiative report”, the European Parliament is sending a strong signal that it is time to finally get serious about regulating crypto assets. We as Greens are pursuing two objectives in this respect: Firstly, a legal framework should open up and promote the opportunities of “crypto-assets”. Secondly, we Greens call for a close look at the risks involved. Above all, the better protection of consumers and the rigorous prevention of criminal activities should be the main focus. We also see the danger that future global virtual currencies such as Facebook’s Libra could undermine existing monetary systems and thus create new systemic risks. Last but not least, many existing crypto assets consume enormous amounts of electricity and thus have a disastrous ecological footprint that is disproportionate to their usefulness.
Of course, we Greens welcome the fact that digital innovation will make financial services better or cheaper for consumers. But this should not come at the expense of weaker consumer and investor protection. It is therefore important that new providers comply with the existing rules.
We Greens are particularly committed to the following points:
Stronger prevention of money laundering
The gaps in the 5th EU Money Laundering Directive (AMLD 5) must be closed. So far, only the providers of exchange transactions between crypto-assets and normal currencies are subject to money laundering rules. These must be extended to all service providers in the crypto-asset sector, in particular crypto-to-crypto exchanges and wallet providers who hold crypto-assets in custody for their customers. It must be ensured that all providers effectively and completely implement the Know Your Customer Principle (KYC), i.e. mandatory customer authentication. In particular, the European Commission should seek ways to ensure that this is also the case for providers from outside the EU who offer crypto-asset related services within the EU. In addition, providers should not be allowed to undermine the requirements by using techniques such as tumblers or mixers that disguise transaction partners using cryptographic methods.
Same rules for same risk
The rules should not be based on the technology used. Instead, the focus must always be on the economic purpose of a crypto-asset and the risks involved. For example, if crypto-assets function like shares in an investment fund or securities, investors must be able to rely on the same rules for investor protection. It is therefore essential that crypto-assets that are similar to a traditional regulated financial product are fully subject to the existing requirements.
Strict requirements for stablecoins
Stablecoins are crypto-assets that promise a fixed exchange rate against a normal currency, such as the Euro, or a basket of currencies. We want such crypto-assets to at least meet the requirements of the E-Money Directive. In particular, users should be able to redeem their stablecoins for the promised nominal value from the issuer at any time. For global stablecoin projects, additional requirements should apply in order to limit systemic risks.
Virtual Euro by the ECB
A virtual Euro could give European citizens access to cheap, fast and secure transactions. We would therefore welcome it if the European Central Bank were to examine the possible introduction of digital central bank money in impact studies.
Single European supervisor
A single supervisory authority should be responsible for all activities and services related to crypto-assets in the EU and a single rulebook should apply. All providers of such services should be subject to central registration.
In the run-up to this proposal, we asked experts for suggestions for the legislative report, which were received in large numbers. We would like to take this opportunity to thank all contributors. I would also be pleased to receive further feedback.
With green European greetings
The draft report by rapporteur Ondřej Kovařík: https://www.europarl.europa.eu/doceo/document/ECON-PR-650539_EN.html?redirect
Our amendments to the draft report: https://sven-giegold.de/ams-to-inl-digital-finance-final/