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The European Union May Opt for Containment of Cryptocurrencies Instead of Banning Them

Thomas Seattle by Thomas Seattle
January 31, 2023
in Crypto
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The European Union May Opt for Containment of Cryptocurrencies Instead of Banning Them
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On Monday’s episode of CoinDesk TV’s “All About Bitcoin,” Luzius Meisser, chairman of the cryptocurrency firm Bitcoin Suisse, suggested that constructing a firewall between traditional banking systems and cryptocurrencies may be the best way to preserve the digital asset industry in European Union.

This Containment Policy Can Be Helpful

According to Meisser, Zug’s four-strategy framework could be a boon for both cryptocurrency and the traditional finance space. He stated that “containment” is likely the approach EU lawmakers will choose to pursue. This strategy would help ensure that digital assets are regulated within their respective jurisdictions with greater transparency and trustworthiness for all parties involved.

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According to Meisser, these policies aim to guard the traditional financial system against any potential damage caused by cryptocurrencies. However, he believes that this may also serve as a form of protection for digital currencies from faults and errors often associated with conventional finance systems.

The European Union Recently Introduced New Restrictions

Last week, the European Union legislative body passed a motion that enforces stringent standards on banks investing in cryptocurrency, requiring them to have one euro of their own capital for every euro held in crypto assets. These restrictions mimicked regulations set forth by the Basel Committee on Banking Supervision, an international standard setter for such practices within the industry.

The European Union Recently Introduced New Restrictions

According to Meisser, the committee’s proposed crypto banking containment regulations will become even more restrictive towards digital currencies. A prime example of this is their 1%-2% rule, which seeks to cap a bank’s exposure to cryptocurrency at 2%. This would require them to secure an additional bitcoin for each one held for clients – essentially prohibiting any form of financial dealings involving it altogether. This containment is set into effect by the start of 2025 and could have serious repercussions on traditional banks and those operating in the cryptocurrency sector.

According to Meisser, this means that “there is no way a traditional bank account can be used where an individual holds bitcoin as a claim.”

States Will Not Take the “Laissez-Faire” Approach

As per the Committee’s regulations, banks would not accept cryptocurrency as security. This could prove significantly difficult for any future loan requests a client may make. Banks will only have access to storing clients’ cryptos – nothing else, so stated Meisser. In addition, policymakers are unlikely to completely outlaw cryptocurrencies either due to their compatibility with liberal political order, according to Meisser.

He stated that legislators are unlikely to pursue a laissez-faire approach and let the market self-correct since such an action would make them “obsolete” and obstruct their aim.

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Thomas Seattle

Thomas Seattle

I graduated from Lancaster University and currently working in the financial services industry. I’m a goal-driven journalist who tracks down personal and corporate finance stories and delivers on deadline and a reporter/editor with extensive experience in newspapers, magazines and the internet in public and private markets, equity and debt, M&A, banking, fintech areas.I am very passionate about philosophy, which was my major study area in the university, innovation, ethical business practices, corporate social responsibility, and learning new skills and languages. In my time working with non-profits, judges, financial startups, and other companies and organizations, I have developed an excitement for generating innovative ideas and using them to create lasting, impactful solutions. I am fortunate to have been involved in every part of the implementation process, from brainstorming to designing a plan of action with a team to completing the projects, and love being able to use my creativity in every step of the way.

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