Will the EU tighten cryptocurrency regulations that affect the price of Bitcoin?

Finance ministers of the European Union member states are taking a close look at cryptocurrencies and the regulatory challenges they pose. They plan to discuss whether to tighten regulations and examine issues such as the lack of transparency in the industry and the misuse of cryptocurrencies for illegal purposes such as money laundering, tax evasion, and terrorist financing.

The meeting will take place in Vienna on September 7, during which, according to the documents, European regulators will consider ICOs as “an effective way to raise capital.” Ministers are interested in finding a way for cryptocurrencies to modernize existing economic systems. It remains unclear whether any strict restrictions affecting cryptocurrency markets will be adopted. Regulators in China are certainly working tirelessly to eliminate cryptocurrencies from the country entirely, but most states take a much more reasonable approach to the industry. While it is unclear what the outcome of the upcoming EU finance ministers’ meeting will be, policymakers have clearly taken a “do no harm” stance, allowing innovation to progress and trying to reduce fraud and illegal activity. Regulatory groups in the United States have sent mixed signals to investors, although their approaches generally appear reasonable. The Securities and Exchange Commission (SEC) has remained fairly laid back about cryptocurrency regulation, but has rejected countless ETF applications due to fears of “market manipulation” and volatility. The SEC’s regulatory counterpart, the Commodity and Futures Trading Commission (CFTC), is in favor of cryptocurrency markets, saying that technology and investors deserve “respect” and that regulatory rules should only act in the best interests of markets and investors. Notably, U.S. Treasury Secretary Steve Mnuchin spoke this week in defense of the cryptocurrency industry against spyware. In a report from his Fintech department addressed to US President Donald Trump, Mnuchin said:

“Internationally, many countries have created various regulatory sandboxes – testing grounds for innovation… While this approach in the United States is complicated by the fragmentation of our financial regulatory system, Treasury is committed to working with federal and state financial regulators to create a single solution that does all the right things – essentially the sandbox mentioned above.”

Mnuchin also added that the United States must “stay abreast of developments in technology and properly adapt regulations so that they do not limit innovation,” referring to encryption and blockchain technologies. Japan has focused on regulating cryptocurrency exchanges rather than cryptocurrency markets in general. It is for this reason that Japanese regulators have focused on anonymous cryptocurrencies such as Monero and Zcash, forcing exchanges to delist them. Japan has also taken steps to reduce speculative investment related to cryptocurrencies, for example, by introducing restrictions on leveraged trading, which prevents leveraged and high-risk transactions. As cryptocurrency markets continue to grow and adoption becomes more widespread, it is anticipated that global regulators will cooperate to support innovation and protect investors’ funds.