The European Union’s flagship cryptocurrency legislation, which was passed in 2023, is set to take effect this year. However, there has been uneven enforcement of pre-existing legislation, according to Jon Helgi Egilsson, the chair and founder of Monerium, a licensed e-money issuer in the region. Egilsson expressed concern about the lack of consistent enforcement and how it affects e-money firms. He noted that if you issue e-money, you must be licensed as an e-money institution, or else face fines and potential jail time. However, not everyone is subjected to the same level of scrutiny.
While obtaining a license may seem like a solution, it actually creates additional challenges for e-money issuers. As Egilsson explained, licensed entities face restrictions on what they can do and how they can promote their services. They are also required to submit reports, which are often met with feedback from regulators pointing out areas of non-compliance. This results in significant overhead costs.
Interestingly, while Monerium operates under strict regulatory oversight, other forms of money, such as stablecoins, do not face the same level of scrutiny. Egilsson expressed frustration with regulators allowing this disparity to persist for years.
To understand why this uneven enforcement exists, Cointelegraph spoke with Natalia Latka, the policy director and regulatory affairs expert at blockchain analysis firm Merkle Science. Latka explained that there are two divergent legal viewpoints in the EU regarding the regulation of electronic money tokens (EMTs) or stablecoins.
The first viewpoint focuses on the Electronic Money Directive, which is considered to apply to EMTs even before the introduction of the Markets in Crypto-Assets Regulation (MiCA). This school of thought argues that MiCA reinforces and builds upon the existing framework established by the Electronic Money Directive.
However, the second viewpoint sees MiCA as the primary legislation for stablecoins and EMTs. According to this perspective, stablecoins pose additional risks that traditional e-money does not, such as self-custodial wallets and the potential for global stablecoins to become systemic. The European Commission believed that the provisions of the Electronic Money Directive were insufficient to address these risks, leading to the decision to create a bespoke regulatory framework alongside the existing directive.
The lack of consistent enforcement has been a concern for industry insiders like Egilsson. However, with MiCA set to come into full force later this year, there is hope that it will bring about more uniformity in enforcement. Nevertheless, the legal debate surrounding stablecoins and e-money is far from over. Clear guidance from EU authorities is needed to address the industry’s need for additional clarifications and to navigate any conflicts or overlaps with existing financial regulations and directives.