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Crypto Friendly Regulation can Help UK Brexit, Says $10 Billion Advisory Giant

A political and financial shake-up can act as a catalyst for lawmakers to embrace bitcoin, says Nigel Green.

The CEO of financial advisory giant deVere Group said positive cryptocurrency regulation should form a central part of the post-Brexit United Kingdom. Nigel Green made the comments in an interview with fintech news outlet Verdict on July 9.

DeVere, which has around $10 billion of assets under advice, is concerned the U.K. will end up in recession in the event of a no-deal Brexit, which politicians have promised could happen as soon as October. 

“The growing cryptocurrency market has already provided tangible economic benefits to other major economies,” Green said. 

“Post-Brexit Britain will be uniquely placed to go even further and by embracing it, it could reboot the UK’s financial services sector.”

As Cointelegraph reported, the U.K. has so far failed to provide a comprehensive regulatory roadmap for cryptocurrency, instead favoring a bearish approach which has even included ideas such as banning crypto derivatives.

The uncertainty has failed to quel business enthusiasm, however, with a London-based firm launching the world’s first bitcoin-only bond this month. 

At the same time, data reveals local consumers are increasingly embracing bitcoin (BTC) and other tokens in the absence of the kind of patchwork legal situation in place in the U.S.

For Green, an exit for the European Union would additionally aid London to preserve its financial hub status, freeing it from bureaucracy and leaving lawmakers free to adopt a pro-crypto approach similar to Switzerland and Japan

“Cryptocurrencies – which are digital, global and borderless – are unquestionably the future of money. This is noted by the growing amount of retail and institutional investment into the burgeoning sector,” he continued.

“Whilst other jurisdictions focus on the current, the UK should set its sights on the future to be ahead of the game.”

Bitcoin in fact appeared to profit from Brexit uncertainty earlier this year, gaining ground as mixed messages began coming from Westminster.

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Worsening US-China Trade War Is Behind BTC Price Rise, Digital Currency Group CEO Claims

Barry Silbert claims the recent rise in BTC prices could be linked to the breakdown in trade talks between the US and China.

The CEO of a cryptocurrency firm has suggested that the recent rise in bitcoin’s (BTC) price could be linked to the trade war between China and the United States, Fortune reported on May 20.

In an interview, Digital Currency Group founder Barry Silbert noted how BTC’s acceleration coincided with talks breaking down between Beijing and Washington.

The crypto advocate said bitcoin is proving itself to be a safe haven for investors at times of drama in the global economy — and cited other examples where BTC’s value rose as traditional stock markets took a tumble. Silbert added:

“If you look at over the past five years — when Brexit happened, Bitcoin went up. When Grexit happened, Bitcoin went up.”

However, given the volatility that the crypto markets have experienced over the past two years, the executive acknowledged that there would have been instances when BTC prices took a hit because of macroeconomic events.

The U.S.-China trade war has seen both superpowers slap tit-for-tat tariffs on each other’s goods, ultimately making everyday products more expensive for consumers.

At the start of May, one of the Digital Currency Group’s subsidiaries, Grayscale Investments, launched an ad campaign urging investors to drop gold and embrace bitcoin instead.

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Parliament Blocks Brexit No-Deal But Bitcoin (BTC) Still in Play

Brexit Bitcoin Cryptocurrency Price Prediction 2019

On April 3, UK lawmakers were able to pass a preventative measure by one vote that would stop the possibility of No-Deal Brexit. Compared to alternative outcomes over how U.K. transition away from the European Union will occur, No-Deal has been hailed as one of the more catastrophic. The move would have entailed an immediate cease in relations between the U.K. and E.U, with no clear path forward on how the two would interact going forward–in effect producing massive economic, trade and travel uncertainty.

However, cryptocurrency analysts have pointed out that such a situation would likely have a favorable impact on the price of Bitcoin. Historically, Bitcoin and top cryptos have thrived in markets of volatile fiat. Thus far, Venezuela has been the primary testing ground for cryptocurrency adoption as an alternative currency, with digital assets also being an attractive store of value during times of high economic uncertainty.

Even with the most recent movement to prevent a No-Deal Brexit situation, Bitcoin is likely to thrive regardless of the plan of action Theresa May creates for her country by April 12th’s looming deadline. For one, the monumental event of Brexit and the economic implications it holds for the majority of Europe is likely to impact the price of both the Pound and Euro. Given the uncertainty of what is to follow a U.K. transition away from the European Union, Bitcoin could find itself in a favorable trading position relative to the Pound, with the latter at risk of entering into an inflationary period.

Bitcoin and cryptocurrency prices may have seen some retraction on the day following their monumental bull run, but the price of BTC could receive an injection of investment if Brexit negotiations continue to falter. Cryptocurrency has been pointed to as an alternative vehicle for investment in the event of another economic recession in the United States, similar to the 2008 stock market crash.

While some analysts think economic downturn could prove fortuitous to cryptocurrency investors, it also highlight the necessity of digital assets and an alternative currency market to government fiat. Cryptocurrencies provide citizens with a global means of operating outside their individual fiat, including a removal of the geopolitical ties and policy making inherent in U.S. Dollars and British Pounds.

The severity of economic collapse that could occur in the event of a contentious Brexit or another stock market collapse would be devastating and unwanted in the broader financial landscape. However, it does provide an opportunity for cryptocurrency at a time when digital assets and coin adoption are reaching their historic zenith.

The advent of Facebook Coin and the J.P. Morgan Chase JPMCoin in development send a positive message that the industry of cryptocurrency is every bit legitimate and capable of handling real world issues. Many investors and outside analysts may look at the erratic and volatile price of BTC and see a currency failing to thrive, while those within the development space would argue that adoption for the technology is following a typical curve of finding its acceptance.

Either way, the April 12th deadline for Theresa May and the U.K. legislators to decide upon the Brexit handling is looming large over both the traditional financial markets and those of cryptocurrency.

The post Parliament Blocks Brexit No-Deal But Bitcoin (BTC) Still in Play appeared first on Ethereum World News.

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Analyst: Brexit No-Deal Will Favor Price of Bitcoin (BTC)

Brexit No-Deal Bitcoin BTC Price

Theresa May and the U.K. parliament are 9 days away from deciding upon the fate of the country in regards to Brexit, a decision that could have widespread and impactful results for the price of Bitcoin.

According to Jefferson Nunn, analyst and contributing author to Forbes, a no-deal Brexit decision will ultimately have the largest effect on Bitcoin. In terms of how the U.K. can handle its withdrawal from the European Union, a no-deal decision would result in the immediate withdrawal of the United Kingdom from the EU, with no negotiations in place to determine what that relationship would be like moving forward. Such a decision would lead to a massive disconnect in border flow between the UK and its European counterparts, leading to a disruption in trade and the ease of which people are currently able to travel.

If a no-deal goes through, Nunn predicts that the U.K. will enter a hyper-inflationary market, conditions that cryptocurrency has typically thrived under (look no further than the adoption of crypto in Venezuela and Argentina). Nunn continues,

“Unemployment will rise, the already strained UK central bank will be forced to “print cash” and Bitcoin will rise against the Pound.”

In addition to raising the value of Bitcoin against the British pound, Nunn finds it likely that cryptocurrency will find a favorable exchange rate against the Euro. The U.K. ranks 5th in terms of world economies, contributing a significant portion to the economy of the European Union. Brexit would cause a dramatic shift in the economic output of the EU, including the interchange between member countries such as Germany with the United Kingdom going forward, thereby contributing to the Euro’s decline against BTC.

Nunn also cites the contribution of the most recent bull run for Bitcoin and cryptocurrency, which is now caught inexorably with the proceedings of Brexit. Fears over the state of both the British Pound and E.U. Euro have likely contributed to the sudden investment in BTC. In a bizarre twist of fate, cryptocurrency may prove to be more price stable in the coming months than the market uncertainty that is being imposed over the Brexit ordeal. Decisions made in the coming weeks will contribute further to the price change of Bitcoin, however the groundwork built for BTC pricing throughout 2019 is already significantly different than that of the previous year.

December 2017 brought about a bullish sentiment and exponential price increase for cryptocurrency that was driven primarily by FOMO and hyper-inflated investor expectation. To put simply: cryptocurrency was not ready for the flood of capital that entered the market at the end of 2017, with adoption lagging behind valuation. Predictably, market prices tumbled in the following months, leading many analysts to refer to 2018 as the “crypto winter.”

The first quarter of this year has painted a different story for cryptocurrency, with figureheads and companies pushing adoption and industry growth ahead of price speculation. Brexit could force Bitcoin prices higher as both individuals and firms alike look to the usability of cryptocurrency as a more attractive means of currency than the uncertainty of their fiat alternatives.

At the very least, the next several weeks should prove to be even more exciting for cryptocurrency, and set the stage for potential BTC breakout adoption if the Pound and Euro falter.

The post Analyst: Brexit No-Deal Will Favor Price of Bitcoin (BTC) appeared first on Ethereum World News.

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Brexit and April Fool’s Joke Possible Catalysts for Crypto Rally, Crypto Reporter Says

Hong Kong-based crypto reporter Eric Lam cites Brexit and a Bitcoin ETF joke as possible catalysts for the recent rally in crypto markets.

Hong Kong-based crypto reporter Eric Lam believes nobody in the crypto industry has a good theory to explain the recent recovery of crypto markets. Lam shared his stance with Bloomberg on April 3.

On Tuesday, April 2, shortly after the Asian markets opened, the price Bitcoin (BTC) unexpectedly rallied by 20 percent. Today the world’s top currency hit $5,000 for the first time since November 2018, while major altcoins have seen double-digit gains.

Lam has ironically linked the uprising to a crypto-related April Fool’s Day story, which claimed that the U.S. Securities and Exchange Commission (SEC) finally approved a Bitcoin exchange-traded fund (ETF). CNBC also mentioned this joke as a possible catalyst behind BTC rally.

The reporter also suggested that crypto investors might start buying coins as the market started showing signs of recovery, forcing the prices to grow further.

Moreover, Lam agrees with an earlier theory which claimed that some investors are changing pounds to Bitcoin ahead of Brexit, which is scheduled to happen in mid-April.

Lam also thinks that the surge can be related to algorithmic trading. As Bloomberg explained in another article dedicated to the so-called crypto Renaissance, the computer mechanisms were allegedly triggered by a mysterious 20,000 BTC order (around $100 million at the press time) that was spread around U.S.-based crypto exchanges Coinbase and Kraken and Luxembourg’s Bitstamp.

As of press time, Bitcoin is still making gains, trading at $5,238 according to CoinMarketCap.

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Blockchain Boom in Ireland, but Brexit Looms

Financiers and investors fear that a “no deal” Brexit could spell “bust” for Ireland and the nations’ blockchain industry.

Strong growth has returned to Ireland one decade after the banking crisis and international bailout. But, financiers and investors fear a “no deal” Brexit — in which the United Kingdom leaves the European Union without a trade agreement at the end of the month — could again destabilize Ireland’s boom-and-bust economy.

The U.K. received 11 percent of Ireland’s exports of goods in the past year, while supplying more than one-fifth of its imports. The Irish central bank conjectures that an orderly exit from the EU would decrease the gross domestic product by 1.5 percent, according to a Reuters story.

While the economic uncertainty — like in many countries — has driven curiosity in cryptocurrencies such as Bitcoin, Ethereum and others in Ireland ahead of Brexit, it casts a shadow over a burgeoning blockchain boom.

“It’s hard to see beyond the shadow of Brexit at the moment,” said Dave Fleming, global head of research and development for Mastercard Labs in Ireland. “If Ireland is affected, it will probably be similar to 2008 and the whole world might be affected so possibly blockchains might help.” The Irish will have to wait and see, he says.

Ireland’s hope

If Britain leaves without agreeing to terms on the border with Northern Ireland, a more strongly enforced border could partially isolate Ireland and reignite conflict. According to Anthony Day, chief operating officer of Deloitte’s EMEA Blockchain Lab in Ireland, Brexit brings to mind the concept of a “digital border” between Ireland and the U.K. As Day explained:

“We see significant potential for Blockchain to provide the capability to enable secure, real-time and automated infrastructure to support trade, reporting, and the movement of goods and people. However, establishing the relevant working groups, governance, deploying such platforms and completing the necessary transformation within both public and private sector organizations would be a multi-year initiative, and the timescale for Brexit is immediate.”

Brexit has dampened Irish consumer confidence and stymied foreign investment. Ireland’s biggest companies are drawing up backup plans in case of a no-deal Brexit. Business owners fear tariffs, customs paperwork and delayed shipments of goods from Britain. AIB, Ireland’s biggest bank, said this past Monday that one-third of companies have canceled or postponed investments because of Brexit.

“A Brexit ‘no deal’ is clearly the biggest concern,” said Raul Sinha, a banking analyst at JPMorgan Chase.

Cryptocurrency and Ireland

According to Day, blockchain is flourishing in Ireland. The exchange Coinbase, development company Consensys, and Wachsman PR have all opened offices in Dublin. Deloitte deliberately chose Dublin as the home for the EMEA Lab and invested in a dedicated facility.

Day notes that the Irish government has committed 500 million euros toward its Disruptive Technologies Innovation Fund. Through the fund, business and research groups can apply for funding to progress blockchain and other technologies.

“From a Blockchain perspective,” Day said, “we have seen strong engagement from across Ireland’s major sectors (Financial Services, Food & Agriculture, Technology, Aviation and others) in applying Blockchain to address established industry pain points such as transparency, data sharing, fraud and driving efficiency in trading activity.” Fleming also sees many big enterprises adopting blockchain:

“Well, as far as I can see, there is a massive uptake of crypto inside financial firms. From people I have talked to inside the industry, I’d say most firms, including the Big 4, as well as most of the banks located here, will be moving most of their verification methods to the blockchain within a few years. People from all over the tech sector are picking up crypto and figuring it out.”  

ConsenSys, which opened an office in Dublin last year, remains active in the city.

“What is surprising is the amount of blockchain activity taking place in Ireland,” ConsenSys Ireland MD Lory Kehoe told Cointelegraph. “While the blockchain eco-system is relatively new in Ireland we are seeing rapid development of the market here.”

Ireland's Blockchain Landscape

Kehoe cites working groups like Blockchain Ireland (BI), a group of government and private companies and individuals, as a big part of the development of the ecosystem there:

“Ireland has a number of fantastic third level programmes in computer science and also a talent center of thousands of people who have come to work for some of the major social and tech companies that have their EMEA headquarters here.”

He believes, however, more needs to be done to ensure that coding and developer education is introduced to the education cycle early.

“Business and government need to work together to equip Irish citizens with the skills they need to work in the economy of the future,” Kehoe said.

The government’s role

Jillian Godsil, co-founder of Blockleaders.io — who also works with Blockchain Ireland — and Kehoe both mentioned “exciting news” coming soon from Blockchain Ireland.

“The whole of Ireland will go crazy for Blockchain,” Godsil said.

The growth of the blockchain industry comes as tech and finance companies move to Dublin — many are coming from the U.K. ahead of Brexit. So, while throughout history the Irish have left their homeland to seek work, hundreds of U.K. businesses are already relocating to the Emerald Isle in order to keep operations based inside the EU, thus creating more jobs for those living in Ireland.

Barclays, Bank of America, CitiBank, Google, Facebook and more are all moving their EU headquarters to Ireland from London. Citibank and Bank of America have merged U.K.-based subsidiaries into Irish subsidiaries, bringing in billions worth of assets to the country.

Still, Brexit looms. It could decide whether Ireland’s boom continues or goes bust. In the words of Mastercard’s Fleming, we’ll have to wait and see.

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As No-Deal Brexit Looms, UK Blockchain Startups Are Weighing Options

From longer approval processes to the threat they might lose access to the European market, it’s safe to say U.K. blockchain startups are looking for contingency plans.

A quick recap: in 2016, the U.K. held a referendum on whether to stay in the European Union (E.U.), with a majority of voters opting to leave the economic bloc. Since then, the government has been negotiating with E.U. officials on the terms of its exit – but recent hurdles have raised the specter of a “no-deal Brexit” that could lead to economic turbulence and uncertainty.

It’s that uncertainty that has some blockchain startups sweating about their future prospects – at least in the months ahead as politicians attempt to hammer out an agreement.

“Brexit is a hindrance to everything in the short term,” said Jamie McNaught, CEO and founder of Solidi Ltd, which is developing a blockchain-based payments platform that uses cryptocurrencies to facilitate money remittances.

He told CoinDesk:

“[It’s] because all fintech regulation experts and lawyers are busy with so many things at the moment. They wouldn’t be busy if the Brexit hasn’t happened. In terms of just getting time with people is difficult at this moment. Will it (Brexit) be a hindrance in the mid-and-long term? That really depends on how successful the Brexit will be.”

The startup is one of the four blockchain companies that were accepted by the U.K.’s Financial Conduct Authority (FCA) for a normally six-month-long sandbox test in December 2017.

Until this July, Solidi was still in the regulatory test, as “the whole thing is being held up by some of the requirement as to become regulated,” McNaught said.

What Solidi is waiting for is the approval of a money service business (MSB) license from HM Revenue & Customs, the U.K. authority that reviews anti-money laundering compliance. Solidi has waited nine months to get approved for the MSB license, but the process previously took about five weeks, and the startup is not the only company in this position according to the FCA, McNaught said.

Stormy horizon

To other blockchain firms who aren’t facing that specific issue, the ramifications of a “hard Brexit” have become a big concern.

Renat Khasanshyn, co-founder of Etherisc, a European firm offering decentralized insurance protocol, expects Brexit will create hurdles for users and developers of its protocol and, therefore, hamper client growth. The company’s platform allows providers to build insurance products on top of an open-source infrastructure.

But if negotiations around Brexit falter, cross-border market testing will be much harder, and compliance costs for providers will increase, as Khasanshyn explained.

“The users of our protocol will be impacted by Brexit negatively because they will need to comply with regulations in the U.K. and the EU, which will likely go in different directions,” Khasanshyn told CoinDesk. “And they will comply and pay for this compliance twice.”

For London-based blockchain startup Globacap, the biggest concern is likely to be the threat of the loss of passporting rights.

In its white paper on Brexit, the British government proposed new trade arrangements with the EU, suggesting the U.K. and the economic bloc maintain current agreements to trade goods but not services.

Under the proposal, British financial services companies such as banks, insurers and asset managers risk losing their passporting rights – which grant them unconstrained access to other EU markets – when the U.K. formally exits the bloc next year.

Myles Milston, CEO and founder of Globacap, explained that “normally, once [we] become a fully authorized securities firm, we get passporting [rights] into the rest of the countries in the EU.”

“However, obviously with Brexit, we might not get that passporting right anymore,” he went on to say. “So it doesn’t actually affect the sandbox test, but it might affect our business model after the sandbox.”

Sunnier shores

Unless a deal is struck to extend market access – at least for a transition period – these firms will have to pay up to open new bases of operation in the EU or face a severe loss of market access.

Blockchain companies that provide payment or e-money services, therefore, anticipate unfavorable impacts on their businesses, with a number of firms contemplating to set up separate EU subsidiaries to avoid being blocked from the market altogether.

Globacap is another project participating in the FCA sandbox, within which it is working on the issuance of debt and equity securities on blockchain in the FCA’s oversight.

As soon as the project goes through the test and is fully launched as a company, it plans to open an office in Europe and apply for regulatory clearance to avoid losing its passporting rights, Milston said.

“At the moment we are deciding where the best place is in Europe to start that,” he added.

Nivaura, a U.K.-based fintech company building an issuance and administration platform for securities, including tokenized securities, says its seeking approval from German regulators to open an office in the country.

“The passporting now takes about three months, and we can go anywhere,” said Avtar Sehra, CEO and chief product architect for Nivaura.”But if we have to go into Germany and set up a whole new business, there is a whole approval process. It could take from a year up to 18 months.”

Not all doom and gloom

Risks aside, not everyone that spoke to CoinDesk about the potential Brexit impact had a negative view of the situation.

Richard Cohen, a U.K.-based lawyer at international law firm Allen & Overy, contended that Brexit would have little effect on the blockchain industry as a whole – in fact, he sees it as a potential positive for the country in terms of its approach to fintech.

“The U.K. will be allowed to come up with a regulatory framework that is much more favorable to fintech companies and become a friendly jurisdiction in which banks can make the best use of blockchain and global opportunities,” Cohen argued.

Alastair Johnson, CEO of Nuggets, an e-commerce and payment ID platform, also struck a largely positive note, telling CoinDesk that his company has found the U.K. government to be a supportive partner.

And its actions to date – particularly through the FCA, which has sought to include blockchain and distributed ledger startups within its sandbox cohorts – bear out that assertion

“The U.K. is very supportive at the potential of innovation in fintech and technology as a whole,” Johnson said. “And I think they will also see that as an opportunity to create markets, continue growth and associate with Europe and the world as a whole. It’s everything that driving the support.”

Cracked flag image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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How Will the UK Deal With Crypto After Brexit: Expert Take

In our Expert Takes, opinion leaders from inside and outside the crypto industry express their views, share their experience and give professional advice. Expert Takes cover everything from blockchain technology and ICO funding to taxation, regulation and cryptocurrency adoption by different sectors of the economy.

If you would like to contribute an Expert Take, please email your ideas and CV to george@cointelegraph.com.

The United Kingdom and the European Union failed to reach an agreement on an orderly uncoupling, which is a major geopolitical and strategic event, with global implications. Uncertainty about the outcome of the Brexit referendum has already started to weaken growth in the U.K. — which is expected to get worse, based on a highly classified cabinet briefing, with economic fallout in the rest of the Organization for Economic Cooperation and Development countries. The International Monetary Fund said the EU could lose as much as 1.5 percent of gross domestic product from a “no-deal” Brexit, while the U.K. would suffer an even bigger hit — a 4 percent loss of national income.  

Membership of the EU, including the ‘‘The EU Blockchain Observatory and Forum,” with EU’s fintech market valued at $6 billion, has contributed to the economic prosperity of the U.K.  ‘‘Digital technologies like blockchain can be game changers for financial services and beyond,’’ explained Mariya Gabriel, Commissioner for the Digital Economy and Society. Kay Swinburne, a member of the European Parliament (MEP), agrees on blockchain’s utility, but is nevertheless convinced that London’s fintech sector can ensure its future without the EU Blockchain Observatory Forum and without relying on an equivalence for mutual access to EU markets after the country leaves the trading bloc. Because, the U.K. and its territory Gibraltar — the age-old tax haven that has repositioned itself as the new crypto venue of choice — have already created separate virtual currency and blockchain technology initiatives as strategic tools for income growth and national competitiveness. The U.K. has also negotiated a unique deal for uninterrupted access to the EU’s Galileo satellite system in order to sustain their digital economy post-Brexit.

David Coburn, the MEP who foresaw the occurrence of Brexit as a result of EU’s Capital Markets Union initiative said, “I am looking forward to Brexit. Tax competition is healthy.”  

Brexit and the EU’s cryptocurrency and blockchain legislative initiatives

From a legal framework perspective, crypto-assets — unlike financial instruments — are not greatly harmonized in the EU nor highly regulated in the majority of EU member states. The differences in their approach to crypto-asset regulation is due to the differences in their legal framework, the economies and the institutional practices of the respective authorities.  

22 out of 28 EU member states — including the U.K. — have signed on to the EU’s blockchain partnership to share experiences and exchange expertise in technical and regulatory fields and prepare for the launch of EU-wide blockchain applications across the Digital Single Market for the benefit of the public and private sectors. Croatia, Cyprus, Denmark, Hungary, Italy and Romania have opted out.

The EU has been pushing for cryptocurrency regulation at the European and even G20 level, coordinated by the OECD, taking it’s regulation out of the control of member states. The EU also took the lead in proposing an EU-wide digital tax ahead of the OECD. All the while, EU member state cryptocurrency classifications for income tax and for VAT purposes, as well as their taxation, vary widely from member state to member state, with cross-border tax applications as detailed in current tax treaties remaining uncertain. These multiple tax issues are compounded by the individualized implementation of the EU’s Anti-Money Laundering (AML) laws by member states that will likely create barriers to pan-European blockchain implementations — as pointed out by Carlos Torres, CEO of Spanish bank Bilbao Vizcaya Argentaria (BBVA), who, after issuing the first blockchain-based loan, cautioned that blockchain technology is ‘‘not mature’’ and faces major challenges, including the ‘‘volatility of underlying cryptocurrencies’’ and possible compatibility issues with tax authorities and financial regulators.  

1. The Capital Markets Union

The EU unveiled its plan for a Capital Markets Union and a single market for technology-enabled innovation in financial services, with EU-level legislative proposals to enable the financial sector to make use of the rapid advances in new technologies — including in blockchain, artificial intelligence and cloud services — to lower the cost of funding and make the financial system more integrated and resilient in the event of another financial crisis.    

Petru Sorin Dandea, of the European Economic and Social Committee explained that “fintech players should be subject to the same rules as the financial sector.” He believes that the Digital Single Market plan could be instrumental in deepening and broadening the capital markets by integrating digitization, which could serve as a stimulus for fintech.   

The U.K. has been a leader in the CMU initiative, but now with the Brexit deadline approaching, it plans to implement its own crypto regulations before 2019.

Members of the European Parliament also passed a blockchain resolution in the Industry, Research and Energy Committee in order that the EU remains a global hub for fintech — operated on pan-European platforms — post-Brexit, when the EU’s largest financial center, London, leaves the union. As Daniel Mareels of the EESC explained:

“It is clear that, post-Brexit, the EU will have major financial centers, including the U.K. and Switzerland, as neighbors. In this context, it is important for the EU to consolidate, integrate and ensure that it is in a strong position. The establishment of the CMU and the recent initiatives on fintech and the digital economy are part of these ambitious objectives.”

Undoubtedly these are historic times for London, which is losing financial institutions to other EU financial centers on a daily basis. Over the past decade, London was featured center stage in two major events. From 2007 to 2008, it was engulfed in the global financial crisis. Major banks utilized  the U.K.’s network of offshore tax havens in structuring opaque mortgage-backed securities that caused the credit crisis that wreaked havoc on the world economy, threatening the collapse of the world’s largest financial institutions and which was cured by the bailout and nationalization of banks by governments. The U.K. led the massive bailouts with $850 billion that was required to save stricken institutions, which became the target of popular resentment and public scrutiny. And since June 2016, London has been forced to deal with a second major challenge: managing the ongoing difficulties posed by the decision to leave the EU. A decision that has jeopardized its role in opaque, offshore euro-transacted business.

Nevertheless, to skillfully transition from Brexit, London is forging new alliances with Australia, Brazil, Canada, China, Israel, Russia, South Africa and South Korea — countries that have solid commitments to blockchain implementation.  

2. Anti-Money Laundering

The EU has amended its fifth Anti-Money Laundering (AML) directive for crypto-asset, beneficial-ownership disclosure rules on April 19, but this amendment will be transposed into member state national laws in an individualized fashion within the next 18 months — by January of 2020.

Vera Jourova, a member of the European Comission responsible for Justice, Consumers and Gender Equity, at a Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) meeting, explained that ‘‘there is a lack of implementation of AML by 20 member states, as well as very poor cooperation among member states in enforcing AML.’’ Banks are free to move capital across EU states and beyond, but checks on money laundering and other financial crimes remain largely a national competence — a mismatch that EU authorities say hampers transnational/cross-border controls and creates financial stability risks. Some member states are calling for a new body to be set up to counter money laundering at the EU level, while others favor the idea of giving more power to one of the existing EU financial regulators, such as the European Banking Authority (EBA).  

The U.K. launched a new AML watchdog in the beginning of this year and has indicated that, despite Brexit, it intends to adopt EU’s fifth AML directive that is designed to combat terrorism and money laundering, in a move that could unmask the beneficiaries of thousands of secretive trusts for the first time. The directive will apply only to the U.K., rather than its satellites. U.K.-affiliated offshore financial centers will be left to decide whether or not to adopt some or all of the measures.

3. Anti-Competition

The European Parliament Committee on Economic and Monetary Affairs (ECON) sees crypto assets as an indispensable element of European fintech but warns against anti-competitive behavior by traditional banks, which is monitored by the EU Antitrust Commission.  

The EU Antitrust Commission also monitors aggressive tax planning — including by crypto-businesses — that skews competition within the EU. Ricardo Cardoso, the spokesperson handling Commissioner Margrethe Vestager’s portfolio, said that the EC ‘‘has no ongoing investigations concerning cryptocurrency-related issues and we would never speculate on such matters.’’ Instead, TAX3 was established, which has been a threat from the EU to the U.K.’s network of offshore tax havens.  

4. Digital Tax

With a long-term solution of taxing digital firms being postponed until 2020 by the OECD, the EU Commission took the lead by proposing an EU-wide digital tax ahead of the OECD — a brand new taxable nexus, ‘‘digital presence’’ or virtual permanent establishment concepts, which are not addressed in current tax treaties. As Krister Andersson of the EESC said:   

“When assessing the effective level of taxation of the digital sector, the EESC underlines the need to take into account the changes in the tax codes going forward, due to the ongoing implementation of BEPS rules and, in particular, to consider the substantially increased level of taxation in the U.S. of U.S. digital firms operating in the EU, due to changes in the U.S. Tax Code.”

U.K. Chancellor of the Exchequer Philip Hammond disagrees and has called for a global approach to digital taxation through further dialogue at the OECD — rather than pursuing the EU solution.

5.VAT

For the most part, member states characterize crypto-assets as something other than ‘‘legal tender.’ But despite this fact member states — except for the Czech Republic, Estonia, and Poland — as well as the U.K., follow a 2015 decision by the Court of Justice of the European Union that exempts cryptocurrency transactions from VAT because ‘‘Bitcoin’’ had no other purpose than to be a means of payment.

On July 16, the U.K. Parliament voted to amend the Brexit Customs Paper to ensure the U.K. does not remain within the EU VAT regime post-Brexit, which means that the U.K. will not attempt to collect EU VAT on behalf of other EU states, enjoy many cross border trade VAT simplifications, nor remain subject to European Court of Justice rulings on indirect tax.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for Tax Notes, Bloomberg BNA, other publications and the OECD..