EU Commissioner Calls for Legislation Framework for Cryptoassets

The European Union’s financial services commissioner, Valdis Dombrovskis, promised on Tuesday to propose new regulatory framework for virtual currencies, as a response to Facebook’s Libra initiative, which the EU considers to be a risk to financial stability.

The commentary has been brought to light in a recent confirmation hearing seeking for reappointment on Tuesday with the EU policy makers.

According to Dombrovskis “Europe needs a common approach on crypto-assets such as Libra. I intend to propose new legislation on this.”

Valdis Dombrovskis has been a vice president of the European Commission for the Euro and Social Dialogue since 2014. He is also one of the 28 commissioners in the European Commission from 2014 to 2019 and has been in charge of financial stability, financial services and capital markets within the EU.

Prior to this he served as Latvia’s prime minister and finance minister as well as a member of the European Parliament in 2004–2009. Now Dombrovskis seeks reappointment as the executive vice president of the European Commission.

If reappointed, he would be tasked with a brief labelled “An Economy that Works for People” and continue to be responsible for the Commission’s financial services portfolio and its work to expand Europe’s economic and monetary union.

Dombrovskis’ pledge follows an increased level of scrutiny by the European Commission over Facebook’s Libra cryptocurrency initiative. According to several reports, France and Germany have already stated that Libra could limit their monetary sovereignty.

In addition to that, Germany’s finance minister Olaf Scholz has expressed his skepticism of Facebook’s Libra project. The EU has no specific regulations on cryptocurrencies, which, until Libra was announced in June, had been considered a marginal issue by most financial regulators as only a fraction of bitcoins or other digital coins are converted into euros.

Prior to the Libra initiative, Dombrovskis had abstained from regulating cryptocurrencies within the five years he has served. He further affirmed that his change of mind stemmed from the possibility of systemic effects on financial stability that the stablecoin could bring. Aside from that, Dombrovskis further argued that law makers should focus on protecting consumers and tackling the risks of money-laundering using crypto-assets, which can easily cross borders.

Meanwhile, Dombrovskis recently sent a questionnaire to Facebook and the Libra Association, requesting them to address various issues regarding financial stability, money reserve and private risks related to Libra.

Apparently, the questionnaire was part of a push by Dombrovskis to examine how the EU should allow or regulate crypto initiatives like Libra and whether new laws will be in need. It said Dombrovskis has indicated there is a “strong willingness to act at an EU level” when it comes to Libra.