Crypto Regulations Across Europe

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[Editor’s note: This is a blog post from ComplyAdvantage. ComplyAdvantage is a bronze sponsor at LendIt Fintech Europe 2018, which will take place on November 19-20, 2018 in London.]

Cryptocurrency regulations across Europe are as diverse as the countries encompassing it. The landscape is constantly evolving and keeping up to date with the rules isn’t easy.

To help you navigate the various legislative positions towards cryptocurrencies, we’ve put together this guide. Learn how different nations approach coin and exchange regulations and if they have any upcoming legislation which could alter their approach to cryptocurrencies.


The EU

Cryptocurrencies

The EU Parliament has passed no specific legislation regarding cryptocurrencies. While cryptocurrencies are broadly considered legal, cryptocurrency exchange regulations currently depend on individual member states.

Exchanges

Cryptocurrency exchanges are not currently regulated at a regional level. In certain member states, exchanges will have to register with their respective regulators such as Germany’s (BaFin), France’s (AMF), or Italy’s MEF. Authorisations and licenses granted by these regulators can then ‘passport’ exchanges, allowing them to operate under a single regime across the entire bloc. In April 2018, the EU agreed on the text for the Fifth Money Laundering Directive (5MLD) which will bring cryptocurrency-fiat currency exchanges under the EU’s anti-money laundering legislation.

Future Regulations

The EU is actively exploring further cryptocurrency regulations. In February 2018, European Central Bank president, Mario Draghi, stated authorities were working with the Single Supervisory Mechanism to develop a way of identifying the financial risks that cryptocurrencies pose.


UK

Cryptocurrencies

Although the UK has no specific cryptocurrency laws, cryptocurrencies are not considered legal tender and exchanges have registration requirements.

Exchanges

Cryptocurrency exchanges in the UK generally need to register with the Financial Conduct Authority (FCA) – although some crypto businesses may be able to obtain an e-license, instead. Although it doesn’t make special provisions for exchanges, FCA guidance stresses that entities engaging in crypto-related activities which fall under existing financial regulations for derivatives require authorization.

Future Regulations

In 2018, the Bank of England (BoE) revealed that targeted cryptocurrency regulations for the UK are on the horizon. The UK’s Crypto Taskforce, comprising of the FCA, the BoE and HMT, conducted a parliamentary inquiry assessing the risks posed by cryptocurrencies. The group’s final report deemed that the sector will require regulation to protect consumers and prevent financial crime.


Malta

Cryptocurrencies

Malta has taken an very progressive approach to cryptocurrencies, positioning itself as a global leader in crypto regulation. While cryptocurrencies are not legal tender, they are defined by the government as “a medium of exchange, a unit of account, or a store of value”.

Exchanges

Cryptocurrency exchanges are legal in Malta and, in 2018, the Maltese government introduced landmark legislation to define a new crypto regulatory framework and address AML/CFT concerns. The legislation comprises of 3 separate bills, including the Virtual Financial Assets Act (VFA), which set a global precedent by establishing a regulatory regime applicable to crypto exchanges, ICOs, brokers, wallet providers, advisers, and asset managers.

Future Regulation

The VFA regulations (effective from November 2018) will also introduce the Innovative Technology Arrangements and Services Act which will establish a regime for the future registration and accountability of crypto service providers, and establish the Malta Digital Innovation Authority. Going forward, the MDIA will be the government authority responsible for creating crypto policy.


Estonia

Cryptocurrencies

Cryptocurrency regulations in Estonia are open and innovative, especially in comparison to other EU member-states. Although not legal tender, Estonia’s government regards cryptocurrencies as “value represented in digital form”.

Exchanges

Exchanges are legal in Estonia but, after the 2017 AML/CFT legislation, operate under a well-defined regulatory framework which includes strict reporting and KYC rules. Under current legislation, cryptocurrency exchanges must obtain two licenses from the Financial Intelligence Unit of Estonia: the Virtual Currency Exchange Service License, and the Virtual Currency Wallet Service License.

Future Regulation

A number of crypto initiatives with potentially significant regulatory consequences have been mooted in Estonia including a speculative government plan to introduce a national cryptocurrency known as “estcoin”. After EU criticism, Estonia’s government stepped back from the plan but continues to examine ways to use the estcoin within the government “e-residency” program.


Gibraltar

Cryptocurrencies

Gibraltar is a leader in cryptocurrency regulation: cryptocurrency is not considered legal tender in the country, but cryptocurrency exchanges are legal, and operate within a well-defined regulatory framework.

Exchanges

In January 2018, Gibraltar introduced its Digital Ledger Technology Regulatory Framework after extensive collaboration with the crypto industry. Under the framework, exchanges must register with the Gibraltar Financial Services Commission (GFSC) and demonstrate that they are meeting the ‘principles’ of the DLT framework.

Future Regulation

Gibraltar’s government is seeking to strengthen its position as a global leader by exploring further cryptocurrency regulation. In 2017, the GFSC issued a statement about the unregulated use of ICOs and suggested it will monitor their use within the DLT Framework. The Commission has also established an Innovate and Create Team to help businesses innovate new products for the crypto economy.


Luxembourg

Cryptocurrencies

There are no specific cryptocurrency regulations in Luxembourg, but the government’s legislative attitude towards them is generally progressive. Although not legal tender, Finance Minister Pierre Gramegna has commented that, given their widespread use, cryptocurrencies should be “accepted as a means of payment for good and services”.

Exchanges

Cryptocurrency exchanges in Luxembourg are regulated by the Commission de Surveillance du Secteur Financier (CSSF), and new crypto businesses must obtain a payments institutions license. Licenses involve specific AML/CFT reporting obligations under Luxembourg’s “electronic money” statutes.

Future Regulation

Although there are no specific legislative steps on the radar, in March 2018 the CSSF issued a warning about the volatility of cryptocurrencies, their vulnerability to crime, and the associated risks of investing in ICOs. Luxembourg’s progressive approach to crypto looks set to continue. In 2017 the CSSF acknowledged the financial benefits of blockchain technology and Pierre Gramegna has spoken of the “added value and efficient services” that cryptocurrencies bring.


Switzerland

Cryptocurrencies

In Switzerland cryptocurrencies and exchanges are legal, and the country has adopted a remarkably progressive stance towards cryptocurrency regulations.

Exchanges

Switzerland imposes a registration process on cryptocurrency exchanges – which must obtain a license from the Swiss Financial Market Supervisory Authority (FINMA) in order to operate. Cryptocurrency regulations in Switzerland are also in place for ICOs: in February 2018, FINMA published a set of guidelines which applied existing financial legislation to offerings across a range of areas.

Future Regulations

Moving forward, Switzerland’s government has indicated that it will continue to work towards a regulatory environment which is friendly to cryptocurrencies. In 2016, the town of Zug, a prominent global cryptocurrency hub, introduced Bitcoin as a way of paying city fees. In January 2018 the Swiss Economics Minister, Johann Schneider-Ammann stated that he was aiming to make Switzerland “the crypto-nation”.

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