There’s a growing momentum for crypto adoption in Europe, from stablecoins to digital euros. European agencies and companies are taking steps to make the digital financial landscape more accessible and regulated.

ESMA crypto guidelines

On October 20, two major European financial agencies released a paper to discuss new rules regarding how individuals interact with crypto assets. These are called the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA). These rules are aimed at checking if the people running and investing in crypto-related companies are qualified for their roles. 

The guidelines offer a common way for regulators to decide if these people are suitable for giving permission to launch new crypto assets or services. This includes making sure they have the necessary knowledge, skills, and time commitment for their roles.

The new guidelines aim to make the cryptocurrency market more trustworthy and consistent. They are open for public feedback until January 22, 2024. 

Looking ahead to new rules that will be in place by June 30, 2024, the EU’s banking authority has also suggested that companies dealing with stablecoins should start following certain best practices for managing risks and protecting consumers. These initial suggestions were shared with the public on July 12 to clarify what will be expected under the upcoming crypto regulations.

Digital Euro project

In February 2023, a Finnish firm called Membrane Finance launched a stablecoin tied to the euro. The CEO, Juha Viitala, believes this regulated coin, called EUROe, will help more people in Europe to increase their money using decentralised financial apps (DeFi).

On October 18, the European Central Bank said they’re entering the “preparation phase” for their digital euro project. This stage will take two years and will be about setting the final rules and choosing who will issue the digital euro.

Transaction anonymity of digital Euro

On October 18, European privacy agencies released a statement about the digital euro, a new type of money suggested by the European Commission in July 2023. These agencies gave advice on how to better protect people’s personal information. 

For example, they said that rules around how much digital euro one person can have need to be clearer. Right now, the European Central Bank and national banks can see all of a user’s information through one access point, and the agencies think that needs to be reconsidered. They believe there are technical ways to store this data without centralising it.

They also said that the current plans for spotting fraud could be too intrusive and suggested finding less invasive methods. The agencies strongly recommend setting up a privacy limit for small, everyday transactions that don’t need to be tracked for anti-money laundering reasons.

Meanwhile, the European Central Bank said it’s moving ahead with its digital euro project. After two years of studying the idea, they are now going to spend another two years finalising the rules and picking who will be in charge of issuing this digital money.

Private stablecoins vs Central Bank Digital Currencies (CBDCs) in Europe

​​Here’s a comparison between private stablecoins and Central Bank Digital Currencies (CBDCs) in the European context:

Private Stablecoins like EUROe

  • Issuers. Issued by private companies, such as Membrane Finance in Finland.
  • Regulation. While they aim to be regulated, the guidelines are not always as stringent as those for traditional currencies.
  • Accessibility. Generally, it is easier to acquire and use, especially for those familiar with cryptocurrencies and decentralised finance (DeFi) platforms.
  • Purpose. Often aimed at facilitating trade and investment in the DeFi ecosystem.
  • Trust. Reliance is primarily on the issuing company and its ability to maintain a 1:1 peg with the euro.
  • Anonymity. The level of transaction privacy depends on the issuing company’s policies and technology.

Central Bank Digital Currencies like the Digital Euro

  • Issuers. Issued by a country’s central bank, in this case, the European Central Bank (ECB).
  • Regulation. Heavily regulated and backed by the government, making them a more “official” form of currency.
  • Accessibility. Likely to be more universally accessible but may require more stringent identity verification.
  • Purpose. Aimed at a wider array of applications, including retail payments, cross-border transactions, and even government disbursements.
  • Trust. Backed by the government, thereby considered more secure and stable.
  • Anonymity. Subject to government regulations, including Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) laws, meaning less potential for anonymity, especially for large transactions.