New German Coalition Government Cites Crypto in Agreement
In the coalition government signed by the new German government, there is a mention of cryptocurrencies, as it advocated an equal playing field for traditional finance as well as ‘innovative business models. This week, three German parties came together to agree to a coalition deal that will see the right-friendly Free Democrats, the Green Party and the left-friendly Social Democrats (SDP) take the controls from the next month onwards. The agreement is 177 pages long and was published on Wednesday. As per a rough translation of said agreement, the coalition is calling for a new dynamic pertaining to the risks and opportunities that are associated with new financial innovations.
These include blockchain businesses and crypto-assets. The agreement stated that they were going to make the European financial market supervisory law suitable for complex group structures and digitization for ensuring risk-adequate and holistic supervision of new business models. It is said that the crypto sector requires joint European supervision. They also urged the crypto asset service providers to identify the beneficial owners consistently. The document stated that not only should the European supervisory authority address the traditional financial sector, but it should also work on preventing the use of crypto assets for terrorist financing and money laundering.
It reportedly took two months for the coalition to be formed during which time negotiations had taken place. This was after the federal elections in Germany that had taken place on September 26th. Moreover, it is also the end of the reign of Angela Merkel as the Chancellor, who has held the position for 16 years and is now retiring. She will now be replaced by Olaf Scholz of the SDP. Elsewhere on the European continent, two proposals were adopted by the European Council that’s responsible for guiding the political agenda of the European Union. These proposals are named the ‘Digital Operational Resilience Act’ and the ‘Regulation on Markets in Crypto Assets’ (MiCA) framework.
The latter had been drafted initially by the European Union back in September 2020 and its primary aim is to develop a regulatory framework for the crypto space that can support innovation and also take advantage of the potential of these digital assets. Even though the European Parliament still needs to ratify it, if it is put into effect, MiCA will ensure that all crypto asset issuers comply with stringent requirements. However, utility tokens and non-fungible tokens will not fall within the scope of this regulation.
This progressive regulatory proposal has been defined as the most important one in the entire history of the crypto market. The proposals are very significant because every entity that operates in the European Union would be required to follow said rules. In addition, there is also a possibility that these rules could actually end up becoming international standards in the future because of the ‘Brussels Effect’. While people are focused on China and the United States, it appears that the European Union has decided to casually lead the way on how to go about regulating the crypto market.