The European Central Bank (ECB) has issued new licensing guidelines for regulating digital assets, although it currently does not have a unified regulatory framework governing crypto-asset activities and services.
ECB stands for European Central Bank, the central bank of the 19 European Union countries that have adopted the Euro.
The ECB’s banking regulator noted that the ECB is taking steps to harmonize its assessment of licensing applications as “national frameworks governing crypto-assets vary widely.”
The Presidency of the Council and the European Parliament recently reached an interim agreement on the proposals of Markets in Crypto Assets (MiCA).
The agreement requires crypto assets to be placed under a regulatory framework. It uses the Capital Requirements Directive criteria, which has been in effect since 2013, to evaluate licensing applications for crypto-related activities and services.
The ECB proposes that the AML/CFT risk profile will be analyzed as several characteristics of crypto assets, such as their lack of intrinsic economic value or reference assets, make them vulnerable to money laundering.
The report states that crypto companies will be assessed accordingly for their licensing from their business models, internal governance and “fit and proper”.
Due to unique characteristics of crypto assets, such as programmability, the ECB report details that:
“The higher the complexity or relevance of the crypto business, the higher the level of knowledge and experience in the field of crypto should be. Senior managers or board members with relevant IT knowledge and chief risk officers with robust experience in this area are important safeguards.”
Overall, the publication is evidence of how the ECB, among global regulators, aims to present its regulatory activities related to the crypto ecosystem. With the Markets in Crypto Assets (MiCA) Act under active consideration, many believe this year will mark a major shift in European crypto regulation.
The European Central Bank (ECB) on Thursday raised interest rates by 50 basis points (0.5 percentage points) and therefore brought its deposit rates back to zero from -0.5%. The hike was a surprise move as economists had anticipated a smaller hike of 25 basis points.
The ECB, the central bank of the 19 nations that share the euro currency, increased interest rates for the first time in 11 years, ending the six-year era of the negative interest rate policy (NIRP). Now, the ECB’s deposit rate is at 0%, the main refinancing operations rate stands at 0.5%, and the marginal lending facility is 0.75%.
The ECB signalled more rate hikes ahead as part of efforts to control rampant inflation in the eurozone. The Frankfurt-based central bank’s inflation target is 2%. In June, inflation stood at a record high of 8.6%.
In a statement on Thursday, the ECB said the hike is part of longstanding efforts to prevent inflation from spreading more broadly to European goods and services, “The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalization path than signalled at its previous meeting.”
The central banker further mentioned that the hike “will support the return of inflation to the Governing Council’s medium-term target by strengthening the anchoring of inflation expectations and by ensuring that demand conditions adjust to deliver its inflation target in the medium term.”
ECB President Christine Lagarde justified the larger hike: “Inflation continues to be undesirably high and is expected to remain above our target for some time. The latest data indicate a slowdown in growth, clouding the outlook for the second half of 2022 and beyond.”
In the past, The ECB had signalled it would be raising rates in July and September as consumer prices continue soaring. But it was unclear how the central bank would initiate the move.
Since 2014, the central bank has kept rates at historic lows in negative territory as it dealt with the region’s sovereign debt crisis and the COVID-19 pandemic.
The ECB’s rate hike comes one month after the U.S. Federal Reserve (Fed) lifted interest rates by 0.75 percentage points, the third hike this year and the largest one since 1994. The Fed’s move aims to tame the fastest inflation pace in over 40 years.
Since the ECB announced a bigger-than-expected interest rate rise at 12:15 UTC (Coordinated Universal Time), Bitcoin, the flagship cryptocurrency, has held its price steady at around $22,700. Bitcoin is currently trading at $23,125.74 at the time of writing at 20:29 EAT (Eastern Africa Time). The euro (EUR), the official currency of 19 member states of the European Union, rose 0.7% relative to the U.S. dollar from $1.0198 to $1.0257.
On-chain analyst Willy Woo says Bitcoin (BTC) could increase its market cap by more than 20 times from current levels in the next decade.
In a new interview, the on-chain analyst says that Bitcoin could reach a market cap of nearly $20 trillion within 10 to 20 years.
“I think it [Bitcoin’s market cap] will be more. Maybe close to $20 trillion.”
Bitcoin is trading for $43,936 at time of writing while the flagship cryptocurrency’s market cap stands at slightly over $830 billion.
Woo says that whether Bitcoin realizes a multi-trillion market cap will be determined by how the regulatory landscape pans out.
“I think a lot’s got to do with how this plays out within regulation. A lot of unknowns right now.”
According to Woo, authorities in places such as Europe are impacting Bitcoin negatively by triggering fear, uncertainty and doubt (FUD).
“The central bankers, particularly in Europe, are dooming Bitcoin and there’s a lot of FUD right now. I think how that resolves matters.”
In 2021, the president of the European Central Bank, Christine Lagarde, branded Bitcoin a “highly speculative asset” used to conduct “funny business” and called for global cooperation aimed at regulating the flagship cryptocurrency.
Last month, vice-chair of the European Securities and Markets Authority Erik Thedeen called for the banning of Bitcoin mining in the Europe Union bloc.
The on-chain analyst also says that Bitcoin could end up failing to realize its full potential.
“There is a fair chance that it [Bitcoin] will be relegated to a ‘good try’ and will be a $1 trillion sort of exotic asset class and not something that’s major.”
[embedded content]
I
Check Price Action
Don’t Miss a Beat – Subscribe to get crypto email alerts delivered directly to your inbox
Follow us on Twitter, Facebook and Telegram
Surf The Daily Hodl Mix
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
The European Commission has announced that a bill for a digital euro will be proposed in 2023.
As first reported by Politico, EC finance chief Mairead McGuinness officially disclosed the EU’s formal consideration of digital euro legislation at a fintech conference on Wednesday.
“Our goal is to table legislation in early 2023,” the Commissioner for Financial Service said. “A targeted legislative consultation in the coming weeks.”
The European Central Bank (ECB) is already experimenting with designs and systems for a digital euro, with a prototype expected sometime in late-2023. If a digital euro is to be implemented, it will require the seal of approval from Eurozone governors. If they give the green light, then the digital euro could be ready for issuance by 2025.
The digital euro is a central bank digital currency (CBDC) — a financial instrument that central banks around the world are exploring very seriously. The increased interest in CBDC’s has emerged from growing concerns that domestic currencies will eventually be undermined by the growing popularity of cryptocurrencies.
“If we don’t satisfy this demand, then others will do it,” ECB Executive Board member Fabio Panetta said in mid-November, pushing for the implementation of a digital euro.
Last year, the ECB conducted research and published a report on digital currencies. It found that a digital euro may help lower interest rates, speed up transaction processes and decrease cash use.
Irrespective of the reported benefits, central bankers face an uphill battle to win over the public. Research conducted by the UK economic affairs committee and Germany’s central bank shows that the majority of respondents oppose government-backed digital currencies citing skepticism of benefits and fears of government snooping.
Related:IMF recommends CBDC and global crypto standards for financial stability
But official interest in CBDCs around the world has taken off with Kenya’s central bank recently seeking public input around a digital shilling, while Thailand has already begun implementing regulation for a future retail CBDC. The Central Bank of the Bahamas was one of the first to roll out a CBDC, the Sand Dollar in October 2020.
China however, maintains the first-mover advantage in the world of digital currency. The country has outstripped the international community with continued and significant leaps forward in the CBDC space.
The European Central Bank (ECB) has announced the formation of a Market Advisory Group for the purpose of exploring the infrastructural and circulation potential of the digital euro from the perspective of industry spearheads.
The group also aims to uncover the digital euros optimal function within the pan-European currency’s vast payments ecosystem.
The group includes a number of well-established experts from the banking and financial sector, including Aleksander Kurtevski, managing director of Bankart, Antonio Macías Vecino, head of payments discipline at BBVA and Axel Schaefer, payment regulation and innovation specialist at Ingka Group (Ikea), among others.
It is expected that initial consultation meetings will commence in November 2021 and will operate on a monthly basis. The 30 members will work in advisory roles and report their findings for consideration in retail payments discussions within the Euro Retail Payments Board (ERPB).
In mid July this year, the Governing Council of the ECB disclosed plans to commence a two-year preliminary research initiative into the feasibility of the digital euro project, assessing parameters such as infrastructure creation, distribution and design, with an assured intention to “complement cash, not replace it.”
Related: Stablecoins are assets — not currencies, says ECB president
ECB Board Member Fabio Panetta expressed his high-expectations for the project’s success:
“I am pleased that many high-quality experts from the private sector are willing to contribute to the digital euro project. Their expertise will facilitate the integration of prospective users’ and distributors’ views on a digital euro during the investigation phase.”
This is a developing story, so more detail will be added shortly.
Cryptocurrency businesses have continued to receive pressure globally from different regulatory bodies. For example, the Spanish National Securities Market Commission (CNMV) recently released a warning to many financial markets and crypto-related businesses. The warning is on unregistered services which they offer.
From the official document from CNMV, about 11 entities received the warning from the regulatory body on August 16. The document stressed the non-compliance of these entities with the registry of the commission.
Among the listed entities are some prominent crypto trading platforms like Bybit and Huobi. However, this Spanish regulatory body maintains that the unregistered entities have no authorization to provide investment services in the country.
5 BTC + 300 Free Spins for new players & 15 BTC + 35.000 Free Spins every month, only at mBitcasino. Play Now!
Related Reading | Total Cryptocurrency Market Cap Value Surges Across $1.9 Trillion Setting A New Record
According to CNMV’s consulting page, the mandate to provide security-related services is only for registered companies in Spain. Though CNMV has no power to ban a company from operating in Spain directly, it can put forth a court appeal.
Through a November report, Crypto Company Guide in Spain disclosed that about 120 crypto businesses are registered and operational in Spain.
Get 110 USDT Futures Bonus for FREE!
Spain’s Move So Far With Cryptocurrency
A review of some activities from last reveals that Spain has created a friendly environment for crypto businesses.
First, there was the approval of a law to develop a sandbox for financial technologies by the Committee on Economic Affairs and Digital Transformation.
In his speech, Professor Ismael Santiago from the University of Seville confirmed the sandbox would enhance new jobs with increased value. Also, it will bring economic competitiveness and technological development.
Moreover, the professor confessed that implementing the sandbox will be a push-up for Spain by making it a reference point in Europe. In fact, such an establishment catalyzes the crypto ecosystem while attracting more national and international talent.
The daily chart shows that the crypto market has taken a dip after setting new records | Source: Crypto Total Market Cap on TradingView.com
There’s a recent move from the Spanish Socialist Workers’ Party via the introduction of a non-law proposition. This has to do with launching a national digital currency following experimentation of the digital euro by the European Central Bank.
Related Reading | Ukraine’s Security Service Closes Illegal Cryptocurrency Exchanges
According to the proposal, when there’s a necessity for a monetary expansion, a national digital currency would allow higher liquidity.
It will enable a more direct process through the provision of liquidity into current accounts. In addition, such a process will create instantaneous transfers without using any intermediaries or third parties.
Furthermore, the use of digital currency ends banks’ privilege over money. This implies that there’ll be no nationalization of credit or nationalization of the banking system.
Featured image from Pixabay, chart from TradingView.com
President of the European Central Bank Christine Lagarde took to Twitter earlier to announce that the European Central Bank has decided to move up the investigation phase for the euro digital currency. The tweet comes in response to a tweet from the European Central Bank official Twitter handle, announcing that the institution would launch a project to prepare for the possibility of the issuance of a digital euro.
In a press release posted on the central bank’s website, the goals of the project were aligned. This included how long it expected the investigation phase to last, that the project would be designed to users’ preferences, and there had been no technical issues found in a preliminary investigation phase that the bank had carried out.
Related Reading | Bloomberg Analyst Provides Blueprint Of Bitcoin Path To $100,000
5 BTC + 300 Free Spins for new players & 15 BTC + 35.000 Free Spins every month, only at mBitcasino. Play Now!
Speculations abound about how a central bank digital euro would affect the price and market of currency cryptocurrencies. But for now, the realization of this project remains in the far future as just the announced investigative phase would take over two years to complete.
Hot on the heels of this came the tweet from the president of the central bank stating that the institution had decided to get started on the investigation phase. This came only about an hour after the announcement tweet for the press release went live.
We have decided to move up a gear and start the investigation phase of the digital euro project. In the digital age people and firms should continue to have access to the safest form of money – central bank money. https://t.co/sGdxTiipsU
— Christine Lagarde (@Lagarde) July 14, 2021
Get 110 USDT Futures Bonus for FREE!
What This Could Mean For Cryptos
Central bank digital currencies are not a new concept. Lots of countries have been experimenting with CBDCs after the popularity of cryptos grew to the point where governments could no longer ignore it. Citizens were going to use it whether governments wanted it or not.
With the advent of CBDCs like the digital euro, it could spell doom for some cryptocurrencies. This means that the digital euro would be backed by the European Central Bank and be tied to the actual value of its fiat counterpart.
Total crypto market cap currently at $1.33 trillion | Source: Crypto Total Market Cap on TradingView.com
This would mean that euro-backed stable coins would have to compete with the digital euro which is really just an electronic format of the euro. The more stable nature of the CBDCs means that they would be less susceptible to large price fluctuations.
Also enters the issue of using cryptocurrencies as a means of exchange and as a currency. If there are successful CBDCs in the market, then the dream of using coins like bitcoin and ethereum as currencies for daily purchases might just be farther off than forecasted.
The appeal of using cryptocurrencies as a currency comes from the fact that they are perceived as a safer option by holders. If the central bank were to bring the same utility with their coins, then cryptocurrencies might be in for a fight.
A Safer Way To Pay
So far, over 46 countries have announced that they are researching into CBDCs and are looking for a better way for their citizens to pay with their currencies. The European Central Bank has now joined the long line of central banks doing this.
CBDCs when compared to fiat money provide faster, cheaper, and more efficient payments. The digital currencies are going to be built on already existing crypto blockchain systems like bitcoin and ethereum.
Related Reading | I Stand By My $100,000 Bitcoin Price Target, Anthony Scaramucci
But while these CBDCs provide all of the above and more, it defeats the purpose of one of the biggest reasons cryptos were created in the first place; people do not want a government-controlled currency. The decentralized nature of coins like bitcoin has been one of the biggest draws of holders to them.
On the other hand, CBDCs will be under full governmental control and governments will be able to track and trace what citizens do with their currencies.
So while CBDCs might pose a formidable threat to cryptos, their centralized nature remains a big reason why investors are not excited about them.
Featured image from Forbes, chart from TradingView.com
The European Central Bank has previously stated that anonymity would be impossible for digital euro transactions.
ECB representative Fabio Panetta recently contradicted this statement, saying smaller transactions may be anonymous.
It remains to be seen whether Panetta is referring to microtransactions.
Share this article
The European Central Bank appears to have shifted its privacy stance on its upcoming digital currency, with ECB executive Fabio Panetta saying “For smaller amounts, we could permit truly anonymous payments.”
Europe Changes Its Tune on Digital Currency
Panetta’s statement contradicts a previousreportpublished in October 2020 where the ECB stated “anonymity would not be possible” for payments on the planned digital currency.
However, Panetta clarified that anonymity would be for very small transactions only, adding that “in general, confidentiality and privacy are different from anonymity,” and stating that some anti-money laundering checks would be required for most transactions.
.@ecb publishes complete Fabio Panetta interview on Digital Euro from the FT this w/end:
– Design phase may be launched after Governing Council approval in July
– EU Leg required to allow authorities to verify transactions
– Tests taking place both with centralised TIPS & DLT pic.twitter.com/ET47RvvNPg
— Samuel Stolton (@SamuelStolton) June 21, 2021
Panetta additionally affirmed that he believes central banks are better placed to protect privacy in digital payments. Speaking on behalf of the European Central Bank, he stated that the ECB has no commercial interest in user data, and could ensure that “nobody in the payment chain has access to all the information.”
While potential issues such as money laundering, financing terrorism, and tax evasion are all reasons for the ECB’s previous stance on traceable payments, for smaller amounts the risks are much lower. Panetta did not give an example of exactly how small anonymous payments would be.
However, he did state that small transactions of€70 or €100 could be settled offline, with no data recorded outside of the wallets of the payer and payee.
Why Is the ECB Pushing for a Digital Euro?
In theOctober 2020 report, the ECB announced the necessity for a central bank-issued cryptocurrency, listing two main reasons: increased demand for digital payments globally, and to compete with existing stablecoin and CBDC projects, such as China’s digital renminbi.
Along with restating these reasons in the Financial Times interview, Panetta added that adopting a central bank digital currency could help mitigate some of the risks of a future financial crisis, mentioning how a CBDC would be a “riskless” financial instrument and the liability of the central bank.
Share this article
The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
See full terms and conditions.
“Anonymity Would Not Be Possible,” According to ECB’s Digital Eu…
The ECB has published an extensive report explaining its move towards a digital euro. The text also outlines how “anonymity may have to be ruled out” for citizens. Digital Euro…
“Speculative” Bitcoin Needs Regulation, Says ECB President
ECB President Christine Lagarde has called for the regulation of Bitcoin. She argued that the asset is “highly speculative” and has been used for money laundering in the past. ECB…
What is Kusama? How Polkadot’s playground accommodates blockchain de…
Kusama is relatively young and was founded in 2019 by Dr. Gavin Wood, who also founded the Web3 Foundation and co-founded Ethereum. The team behind Kusama is essentially the same…
2030: The End of Fiat Currencies?
Deutsche Bank has released a report arguing that the next decade could usher in the end of fiat currencies. Could their analysts be right? And what part does cryptocurrency have…
European Central Bank (ECB) executive, Fabio Panetta has argued that the creation of a digital euro would help the apex bank protect its monetary sovereignty against threats from competing cryptocurrencies, while also offering users better privacy protection, according to a Financial Times report on June 21, 2021.
Panetta Makes Case for Digital Euro
While financial authorities in Europe are yet to decide on whether to roll out a digital euro, the results of surveys conducted by the European Central Bank thus far have revealed that consumers, merchants, and companies are very much in support of the digital euro, provided it respects their privacy.
In thelatestdevelopment, Fabio Panetta, an executive board member of the European Central Bank has allayed the fears of the digital euro proponents, making it clear that the currency would better protect the privacy of its users, as compared to the so-called stablecoins issued by private companies.
At a time when public cryptocurrencies such as bitcoin (BTC) and altcoins are increasingly gaining popularity in the real world, with recent researchreportsrevealing that cryptos are now part of the preferred payment methods for consumers globally, Panetta has argued that the creation of a digital euro would greatly limit the spread of digital coins issued by other nations and firms, while also protecting the bloc’s monetary sovereignty.
In his words:
“There is the potential threat that could come from others issuing a digital means of payment…If people do want to pay digitally and the ECB does not offer them a digital means of payment, another entity would do that. If the ECB ventures into digital payments, privacy is going to be better protected…because we are not like private companies. We have no commercial interest in storing, managing, let alone abusing, the data of users. ”
Fostering Privacy and Preventing Money Laundering
Earlier in January 2021, the ECB released the feedback received from a public consultation for its digital euro project. A large percentage of respondents are concerned about how their personal information would be handled by the ECB when they pay with the digital euro.
However, Panetta has hinted that the digital euro would support anonymous, offline payments for very small transactions not above EUR 100, though checks will still be carried out on most transactions, to eliminate money laundering, terrorism financing, and tax evasion.
