European member states may be restricted from introducing their own cryptocurrencies in the future. The regulations for cryptocurrency exchanges could differ per member-state, and by compliance with the European Banking Authority (EBA), European Commission (EC), European Central Bank (ECB), European Insurance & Pension (EIOPA) and the European Supervisory Authority for Securities (ESMA). Read more about what the EU already did and is planning to do.
Crypto policy per European State
Cryptocurrencies such as the Ripple rate (Dutch: Ripple koers), are broadly considered legal across the European Union, but cryptocurrency exchange regulations depend on individual member states. Cryptocurrency taxation also varies but many member-states charge capital gains tax on cryptocurrency-derived profits at rates varying between 0 and 50%. In 2015, the Court of Justice of the European Union ruled that exchanges of traditional currency for crypto or virtual currency (and vice versa) constitute supply of services but should be exempt from VAT.
Crypto legislations
In January 2020, the EU’s Fifth Anti-Money Laundering Directive (5AMLD) came into effect. 5AMLD brings cryptocurrency-fiat currency exchanges and the rates, like the Aavegotchi rate (Dutch: Aavegotchi koers), under the scope of EU anti-money laundering legislation, requiring exchanges to fulfill standard reporting requirements. In December 2020, the 6AMLD came into effect: the directive made cryptocurrency compliance more stringent by adding cybercrime to the list of money laundering predicate offenses.
Cryptocurrency Exchange Rules
In the EU, cryptocurrencies and crypto assets are classified as Qualified Financial Instruments (QFI’s). EU laws do not prohibit banks, credit, or investment firms from holding, gaining an exposure to, or offering services in, crypto assets or cryptocurrencies.
Exchanges that deal in QFi’s are regulated at a regional level and firms can simply rely upon their existing QFi licenses in order to provide cryptocurrency-related products and services.
In certain EU member states, exchanges have registration requirements with their respective regulators such as Germany’s Financial Supervisory Authority (BaFin), France’s Autorit?es March? Financiers (AMF), or Italy’s Ministry of Finance. Authorizations and licenses granted by these regulators can then “passport” exchanges, allowing them to operate under a single regime across the entire bloc.
Following 5AMLD, 6AMLD also has consequences for cryptocurrency exchanges. The directive extends liability for money laundering offenses to legal persons as well as individuals, meaning that, going forward, the leadership employees of crypto asset, currency, wallet, and exchange firms must exercise much greater oversight of their internal AML controls.
Future Cryptocurrency Regulations
The EU is actively exploring further cryptocurrency regulations. An EU draft document expressed concerns about the risks associated with private digital currencies and confirmed that the European Central Bank is considering the possibility of issuing its own digital currency.
In January, the European Commission announced a public consultation initiative, seeking guidance on where and how crypto assets fit into the EU’s existing regulatory framework. The Commission followed up with a new proposal known as the Markets in Crypto-Assets Regulation (MiCA). The proposal sets out draft regulatory measures for cryptocurrencies including the introduction of a new licensing system for crypto-asset issuers, industry conduct rules, and new consumer protections.
