Cryptocurrency on Real Estate Transactions

An EU Guide to Broker Regulations on Cryptocurrency.

Cryptocurrency is the term coined for digital currencies that offer a decentralized medium of exchange. Because of its popularity, many countries around the world are already studying its potential as an official part of their financial system.

In fact, the EU has already established a guide to broker regulations regarding the booming cryptocurrency.

First of all, there are many things to know regarding cryptocurrency. Some think of it as the money of the future. While some thought of it as the unicorn of the 21st century.

To understand cryptocurrency better, here are some helpful facts regarding it:
  • It is created and electronically stored through encryption procedures.
  • It uses strong cryptography for anti-counterfeiting and security purposes.
  • The system uses decentralized control as opposed to central banking systems and centralized electronic money.
  • Techniques on encryption are used to control the production of currency units and to verify transactions.
  • This is not dependent on a central bank.
  • Individual Private and public keys are given for safer transactions between people.
  • Aside from being known as a digital currency, it is also considered as an alternative currency or virtual currency.
  • Cryptocurrencies are primarily used outside of existing governmental and banking institutions and are being exchanged over the internet.
  • Cryptocurrency has the unique potential of challenging the existing systems of payments and currency.
  • Satoshi Nakamoto, the inventor of Bitcoin, has a great influence on how cryptocurrency emerged.
Risks with Making Transactions with Crypto Brokers

There are a number of alleged brokerage firms offering physical trading in cryptocurrencies without appropriately informing their clients about the charges that may apply during the transaction. Thus, there are some crypto enthusiasts who have unknowingly availed brokerage services with charges of over 200% per annum.

EU authorities and EU financial regulators have been active in spreading awareness to retail investors. Making transactions with unlicensed financial services providers should be avoided. The current problem with cryptocurrencies is that the EU itself hasn’t established a fully secure regulatory framework that governs all products that fall under the category yet.

Furthermore, the leaders of the EU have voiced out their concerns about money laundering.

Valdis Dombrovskis, Vice president of European Commission says:

“Digital assets are presenting risks in relation to money laundering. It finances illicit activities.”

The commission has to continue tracking and monitoring the market before they can create a complete and official regulatory framework for its trade.

Traders Must Apply and Gain Approval from CySEC

Cyprus Securities and Exchange Commission regulated brokers should have to apply with the regulator for a specific permit. This is to grant them the right in offering cryptos.

Since there is no specific regulation mandating all EU countries to also do it, some local regulators might ask and require the same.

Broker Regulations on Cryptocurrency

According to Mario Draghi, the president of European Central Bank, there is no member of EU state that can bring in or establish its own currency. He emphasized that the currency of the Eurozone is the Euro.

The European legal framework for financial services does not include cryptocurrency trading services into their financial instruments framework. However, regulated brokers should adhere to certain requirements when providing cryptocurrency to clients.

Here are the guidelines for the brokers to follow:
  1. The turnover in cryptos should not exceed 15% (fifteen percent) of the total turnover of the brokerage quarterly.
  2. Passporting of the financial regulations is prohibited except for CFDs.
  3. The brokers must act fairly, honestly, and professionally. They should not give misleading information to their clients. Instead, they should provide fair and clear guidance and warning of risks on investing in cryptos. In addition, there should be adequate product governance arrangements.
  4. Brokers must disclose and explain the prices, costs, and rollover fees.
  5. As the MiFID regulatory framework is not applicable, brokers should always inform their clients of the following:
  • EU is not controlling or directing crypto trading.
  • Crypto products are high-risk and complex.
  • Clients can lose all their invested capital.
  • Virtual currencies values could widely fluctuate and may turn to significant losses over a short span of time.
  • Investors are not required to trade in virtual currencies as they are not appropriate for all of them.
  • Brokers can’t trade products, such as cryptocurrency, if they don’t have enough knowledge and expertise.
  • Clients must be fully aware and understand the specific characteristics and risks related to these products.