How the E.U. Crypto Crackdown Could Impact the Industry

Resources  /  Published 11 Aug 2021  /   / 

Cryptocurrencies have certainly come a long way since the launch of Bitcoin over 10 years ago. There are now over 1,000 different cryptocurrencies all with different functions and purposes. However, it’s not all profit and “moons”. There are some things that have happened along the way that have caused a few eyebrows to be raised. More and more regulation is coming, which will force cryptocurrencies down narrow paths in order for them to stay relevant and more importantly, legal.

The EU is cracking down on cryptocurrencies as we speak, as they believe they are becoming out of control, and some even believe they could change the economy for the worse.

EU Crypto Regulation | Trifecta DirectoryWhat measures are the EU proposing?

France has openly stated that cryptocurrencies should require EU-wide regulation and stricter rules to control the rapidly expanding crypto-market, which is estimated to be worth about $1.5 trillion. One of the reasons why they think it needs strict regulation is the concerns that criminal gangs are using these digital currencies to finance illegal operations, such as drug smuggling amongst other illegal activities. France’s markets regulator has said:

“Granting ESMA the power of direct supervision of public offers of cryptoassets in the EU and of cryptoasset service providers would create obvious economies of scale for all national supervisors and concentrate expertise in an efficient way, for the common European benefit”

More recently European regulators also announced plans to impose tougher regulation on cryptocurrency transactions. The European Commission remarked that: “Given that virtual assets transfers are subject to similar money laundering and terrorist financing risks as wire funds transfers, it is to requirements of the same nature they must also be submitted and it therefore appears logical to use the same legislative instrument to address these common issues.” Such rules would ultimately pave the way for information about crypto recipients and senders to become easily traceable. Limits on larger transactions are also likely to be implemented.

Overall the EU is looking to impose stricter rules and regulations when it comes to cryptocurrencies as a whole, mainly in an effort to clamp down on illegal activities. However, there are other reasons which include creating an overall regulatory body to oversee the buying, selling of cryptoassets.

What are the short and long term effects of crypto regulation?

When investors smell regulation in the markets an immediate panic state ensues, mainly because they are afraid for their assets and profits. This has happened countless times when new types of assets have entered the market, there is always a conversation about how it will be regulated. The selling of these assets will normally follow to avoid any heartache. This is mainly the short term effects, but if we think longer term, there is almost always a better outcome.

When thinking about long term effects, it can be hard to say what the outcome is. But governments seem to be shifting their stance on cryptocurrencies now more than ever, whereas a few years ago they were heavily against it.

It is unlikely that regulation will see the end of cryptos, because they have firmly planted themselves into the world economy. To uproot the cryptomarket would certainly have a domino effect which would spill over into other markets and could trigger another recession. These measures may change the way we interact with cryptocurrencies and change how we use them, but to say that it could spell the end is overkill.

Regulating cryptos – the pros and cons

One of the main cons of crypto regulation is the fact that it goes against what cryptos stand for, which is segregation from control and regulation. That is what drove Bitcoin to become so popular. Another enticing feature of cryptos is that many platforms allow its users to remain anonymous on their networks. This means that users can spend their money freely away from governmental surveillance, which makes it difficult for authorities to track down users involved in these operations. Regulation would almost certainly do away with such freedoms in order to mitigate the risk of cryptocurrency being used for illegal activity.

But on the plus side, the introduction of regulation may introduce some beneficial features, which could protect your cryptoassets in case anything happens in the event of a market crash etc. Other regulatory advantages that would greatly benefit crypto investors include reducing crypto-related scams through fake coins and ICOs, and attracting institutional money into the market, which would add legitimacy and entice institutional investors to pour billions into cryptos.

There are certainly pros and cons to each side. While regulation would not necessarily spell the end for cryptocurrencies, it will certainly force them to adapt. Whether investors will remain as enamoured with the crypto space following such changes, is yet to be seen.