On 24 September 2020, the European Commission adopted a Digital Finance Package, which includes a proposal for Regulation on crypto-asset markets and amendments to Directive (EU) 2019/1937. The latter also received support from Slovenia.
Committee on International Relations and European Affairs adopted by consensus its opinion that it supports the position of the Republic of Slovenia on the proposal for Regulation of the European Parliament and of the Council on crypto-asset markets and amendments to Directive (EU) 2019/1937.
It needs to be pointed out that Slovenia welcomes the efforts to regulate the crypto-assets market and to boost innovation in the financial sector. This is why it supports the proposal for a regulation on crypto-asset markets and amendments to Directive (EU) 2019/1937, which will establish uniform rules for issuers of crypto-assets as well as for crypto-asset service providers.
Adoption of the proposed regulation will bridge the differences across the EU that cause fragmentation in the market. Furthermore, the harmonized procedures should reduce the complexity of doing business, thereby contributing to the reduction of operating costs of existing businesses. At the same time, these same businesses and incoming competitors will be granted free access to the internal market and the legal certainty needed to stimulate responsible innovation on the crypto-asset market.
With this regulation, the EU seeks to ensure an adequate level of protection for crypto-asset investors and a clear understanding of their rights against the issuer, while at the same time also help to properly manage the systemic and cyber risks associated with the issuance of crypto-assets and provision of related services. The main reason for all this is to have a positive impact on the EU’s financial stability.
Slovenia has been endeavoring to adopt the regulation due to its close connection with the proposal for a pilot regime for market infrastructures based on the distributed ledger technology (DLT). The government believes that both regulations will contribute to increased use of distributed ledger technology in the financial industry and allow more efficient collection of funds for the operation of companies and the performance of payment and other financial services.
By supporting both regulations, Slovenia is committed to further enabling competition, boosting innovation and reducing risks in digital financial services. Members of the Commission support Slovenia’s commitment.
Main solutions and goals
European Commission’s proposal includes crypto-assets, which fall outside existing EU financial services legislation, and e-money tokens. The proposal has four key and intertwined goals:
1. Provide legal certainty
The development of crypto-asset markets in the EU requires a strong legal framework that will clearly define the regulatory treatment of all crypto-assets not covered under existing financial services legislation.
2. Boost innovation
In order to promote the development of crypto-assets and expand the use of distributed ledger technology, a secure and proportionate framework needs to be established to boost innovation and ensure fair competition.
3. Protect consumers and investors from risk and ensure market integrity
Since crypto-assets are not covered by current financial services legislation and are therefore associated with a number of risks specific to financial instruments, the regulation must ensure market integrity and an adequate level of protection for consumers and investors.
4. Ensure financial stability
Crypto-assets are constantly developing. While the range and use of some crypto-assets is quite limited, the new and emerging forms, such as stablecoins, can become widely accepted and systemically important. This proposal includes the safeguards necessary to withstand potential risks to financial stability and monetary policy that could occur due to stablecoins.
The purpose of this proposal is to provide legal certainty for crypto-assets that do not fall under existing EU financial services legislation and to establish uniform rules for crypto-asset service providers and issuers of crypto-assets. The proposed regulation will replace existing national frameworks for crypto-assets outside existing EU financial services legislation and establish specific rules for stablecoins, which fit the definition of e-money.
Impact assessment and consequences
The proposed regulation on crypto-asset markets aims to provide a regulatory framework for innovation in financial services that does not create obstacles to the application of new technologies. The new regime would reduce regulatory complexity and lower the financial and administrative burdens for everyone involved.
The regulation also lays down harmonized requirements for issuers that seek to offer their crypto-assets across the EU and cryptocurrency service providers wishing to apply for authorization to provide their services in the single market.
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