According to reports citing two documents of the European Union, new rules within four years are being planned to be introduced in the single currency market that will allow making of cross-border payments quicker and cheaper by the use of blockchain and crypto assets such as stablecoins.
Currently about 78 per cent of transaction payments in the EU are made in cash and the European Commission is in the process of setting out its strategy for promoting and encouraging people to make use digital finance to a greater extent. The commission also wants to see a fast shift towards “instant” payments generally with the novel coronavirus pandemic induced lockdowns depicted the growing important of cashless payments.
According to the two documents quoted in the reports, a draft law will be presented by the executive wing of the EU which will clarify the application of the existing rules on crypto assets and will also aim to set out the new rules in order to plug the gaps if any.
“By 2024, the EU should put in place a comprehensive framework enabling the uptake of distributed ledger technology (DLT) and crypto-assets in the financial sector,” the documents said, according to reports. “It should also address the risks associated with these technologies.”
Last year, after the social media company Facebook revealed plans for its Libra token, the term and the concept of stablecoins, which is a type of cryptocurrency that is often backed by traditional assets made it into the agenda of policymakers.
Deliberations of the pros and cons of implementing such a crypto coin of their own is being conducted by various central banks.
According to the documents, while upholding the principle of “same risk, same rules, same regulation,” the EU also intends to ease the process of sharing data within the financial sector so that there is enough encouragement for greater competition and creation and offering of a wider range of services.
The documents said that after the completion of anti-money laundering and identity checks, new rules should also be drawn out and implement by the bloc within four years which will promote and allow new customers to start using financial services quickly,.
“By 2024, the principle of passporting and a one-stop shop licensing should apply in all areas which hold strong potential for digital finance,” it said. Instant payment systems should become the “new normal” by the end of 2021.
The documents said that for there can be many uses for instant payments over and above the traditional credit transfers, particularly in the area of physical and online purchases which are currently dominated by dealings in payment card schemes.
A search for alternatives to the likes of MasterCard and Visa, the US payments companies that are heavily used in the region, has been ongoing in Europe for a long time now.
The impact of charges imposed on consumers for instant payments will also be assessed by the Commission and it may be decided to be capped at a level that will not be higher than the one charged for regular credit transfers.
(Adapted from FinancialPost.com)