European Commission on the legal and regulatory framework for blockchain technology
According to the announcement published on the europa.eu website, the European Commission recognizes the essence of the law and transparent regulations in the field of blockchain-based applications. As emphasized, the European Union (hereinafter: the EU) strongly supports the establishment of a pan-European framework, which will avoid any disorganization in this regard in each of the Member States. In order to ensure consumer safety and increase investments in this area, the European Commission on September 24 adopted a number of legislative proposals that are to define regulations in the cryptocurrency market, and the issues of creating a legal framework for sandboxes of financial regulators in the EU were taken into account.
Pilot program for crypto assets
Note that crypto assets qualify as a “financial instrument” under the Markets in Financial Instruments Directive. It is worth mentioning that this document already mentions, inter alia, on tokenized shares, which proves that some essential elements could already be found in the Directive before.
However, as highlighted in the release, this was ahead of certain principles of the cryptocurrency itself or the Distributed Ledger Technology.
However, with this fact in mind, as of September 24, 2020, the European Commission presented a pilot system in terms of market conditions for traders and setters of transactions in the form of a cryptographic asset. For this purpose, an attempt was made to define the rules for the specificity and operation of cryptocurrencies in the program, which is to help both authorities in regulating regulations and enterprises themselves in implementing blockchain technology solutions. There are 4 main objectives: legal certainty in relation to the secondary market for cryptographic assets, support for innovation (including removing obstacles to adopting new technologies for the financial sector), ensuring protection for consumers and investors, and ensuring financial stability.
Blockchain – European sandbox
It is also worth mentioning that the European Commission is working on a pan-European sandbox in cooperation with the European Blockchain Partnership (EBP), which will enable testing blockchain technology solutions, and as a result, in the future, it may contribute to the widely possible provision of innovative and public services using the blockchain . What’s more, as the EBP assures, data transfers, smart contracts and digital identity in the area of health, energy and the environment will also be tested. It is estimated that the sandbox will be operational at the turn of 2022.
As Valdis Dombrovskis, Executive Vice President of Economy, announces: The future of finance is digital. During the lockdown, we saw how people can access financial services thanks to digital technologies such as online banking and fintech solutions. Technology has much more to offer consumers and businesses, so we should actively embrace the digital transformation while limiting any potential risks. This is what today’s package is all about. An innovative and digital single market for finance will benefit Europeans and will be key to Europe’s economic recovery, offering consumers better financial products and opening up new financial channels for businesses.
Undoubtedly, such activities towards the development of blockchain-based innovation will contribute to the creation of a friendly sphere for digital technologies and it will allow for the stimulation of new solutions to use the potential of the blockchain. Providing EU rules for blockchain-based financial services will achieve an integrated payment system and contribute to the promotion of blockchain technology, which (I hope) will translate into further exploration of this field.