As we reported last week, Finance Ministers from the 28 member states of the EU are meeting Friday and Saturday to discuss new regulations – among them, potential rules for cryptocurrencies. According to Reuters, a report prepared for the ministers advises that the Union should adopt a common set of rules for ICOs and exchanges.
Blockchain and crypto have taken the world by storm, but as always with new technology, lawmakers often fall behind in regulating, and different countries go different routes – at least initially.
In China cryptoes are heavily suppressed – in the name of combating fraudulent ICOs (which are a real and serious problem, to be fair), all ICOs are banned. August saw two major districts ban all events even related to crypto from commercial venues.
On the other end of the spectrum, Japan has taken a very positive stance regarding the emerging space. While the regulations put down by the Japanese Government have made it difficult for some projects to operate in the country, cryptocurrencies are well on the way to being regulated like any other financial instrument, with clear rules for exchanges wishing to operate in the country, and strict regulation of ICOs, and of the responsibilities shouldered by anyone holding one.
A Divided Europe
The European Union so far has not adopted common regulations across all member countries. Instead it has been up to individual member states to set their own rules – with Germany adopting probably the most favourable rules, treating the new asset class as currencies across the board, including a zero tax rate for any profit made when selling a coin – provided you held it for at least one year before selling.
But now the EU may be moving toward common rules for the space. That is, if the states decide to act in accordance with the conclusions of a report by the Brussels-based think tank Bruegel, which will form part of the reading material for the ministers attending this weekend’s meetings. Although acknowledging that the Bitcoin protocol itself cannot be regulated, the report concludes that exchanges and other institutions dealing in cryptocurrencies can and should.
The good news is that the EU, which accounts for some 30% of all money contributed to ICOs, does not seem to be walking down the same path as China, but are rather following the Japanese model of regulating crypto like any other financial instrument.
As to what that means for how EU citizens will be taxed and how individuals’ holdings will be treated, we will have to wait and see. But it looks like the first round of common regulations may be coming.