Cryptocurrencies Archives | Digital Watch Observatory

Digital euro proposal advances in European Parliament committee

Members of the European Parliament’s Economic and Monetary Affairs Committee have adopted their position on legislation to establish a digital euro, moving the EU closer to negotiations on a possible central bank digital currency.

The proposal would create a new electronic form of central bank money issued by the European Central Bank. It is intended to give citizens and businesses a secure digital payment option while reducing reliance on non-EU payment providers.

MEPs backed a model that would allow the digital euro to work both online and offline. Online payments would be processed through an account-based system, while offline payments would use local storage devices and operate similarly to cash.

The committee said privacy-by-design and privacy-by-default principles should be built into the system. Technologies such as zero-knowledge proofs would allow transactions to be verified without exposing personal data, and the ECB would not have access to users’ personal identification data.

Payment service providers, including banks, e-money providers, post offices and regulated crypto-asset providers, would be able to distribute the digital euro across the EU. Most businesses would be required to accept the digital euro, with exceptions for self-employed people and small and micro enterprises that do not accept other digital payments.

Basic digital euro services would be free. These include opening an account, holding and managing funds, and obtaining at least one payment instrument. Offline payments would also be fee-free.

To protect financial stability, individuals would face limits on the number of digital euros they can hold. Businesses would not be allowed to hold digital euros except to accumulate incoming payments for up to 24 hours, and the digital euro would not pay or charge interest.

The negotiating mandates for the digital euro files will be announced at the start of the July plenary session. Final legislation will still need to be negotiated with the Council before entering into force.

Why does it matter?

The ECON vote shows that the EU is still pursuing a sovereign digital payment infrastructure while trying to address concerns over privacy, financial stability and the future of cash. The proposal contrasts with growing resistance to CBDCs in the United States and other jurisdictions. Still, Parliament’s approach also shows caution: the digital euro would need holding limits, pilot testing, a long rollout period and strict separation from the ECB’s monetary policy functions.

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US Congress backs CBDC ban through 2030 in housing bill

The US Congress has backed a temporary ban on the Federal Reserve issuing or creating a central bank digital currency as part of the 21st Century ROAD to Housing Act.

The housing package passed the Senate by 85 votes to 5 and was later approved by the House of Representatives by 358 votes to 32. It now awaits President Donald Trump’s signature.

The CBDC provision would amend the Federal Reserve Act to prohibit the Board of Governors of the Federal Reserve System or a Federal Reserve bank from issuing or creating a central bank digital currency, or any substantially similar digital asset, directly or indirectly through a financial institution or other intermediary.

The prohibition would remain in effect until 31 December 2030. The bill defines a CBDC as a digital asset denominated in US dollars, treated as US currency, a direct liability of the Federal Reserve System and widely available to the general public.

The measure includes an exception for dollar-denominated currency that is open, permissionless and private, and that preserves the privacy protections of US coins and physical currency.

Republican supporters have long argued that a US CBDC could create financial surveillance risks, while digital asset industry groups have favoured private-sector payment innovation, including stablecoins, over a government-issued digital currency.

The measure follows a January 2025 executive order by President Trump opposing the development of a US CBDC. If enacted, the new provision would place a statutory limit on Federal Reserve CBDC activity through the end of 2030.

Why does it matter?

The provision would mark a significant US legislative move against a retail Federal Reserve digital dollar, even though no active US CBDC launch is underway. It also reinforces a broader policy direction in Washington: private digital assets, including stablecoins and open blockchain-based instruments, are being favoured over a central bank-issued digital currency. The debate matters for digital payments, financial privacy and the future role of central banks in monetary infrastructure.

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Crypto groups urge Congress to keep mining and staking tax bill unchanged

Three US digital asset industry groups have urged lawmakers to pass the Tax Clarity for Mining and Staking Act without changes, arguing that the bill would provide clearer tax rules for blockchain validation rewards.

The Blockchain Association, the Crypto Council for Innovation and The Digital Chamber sent a joint letter to the House Ways and Means Committee supporting H.R. 9175 as introduced. The bill, introduced by Representative Mike Carey, would amend the Internal Revenue Code to address the taxation of income from mining and staking digital assets.

Current IRS guidance treats mined and staked rewards as taxable income when received. The industry groups argue that the approach creates uncertainty, liquidity concerns and the risk of ‘phantom income’, where taxpayers may owe tax before they can monetise the assets.

H.R. 9175 would keep newly minted digital assets within ordinary income rules, but would allow taxpayers to elect to defer income recognition until disposal. Under that election, acquisition costs would be capitalised, and gains would be treated as ordinary income when the assets are sold or otherwise disposed of.

The groups oppose a proposed amendment that would impose a five-year limit on deferral. They argue that the cap would add compliance burdens while producing little revenue.

The bill remains before the House Ways and Means Committee. The debate highlights continuing disagreements over how the US tax system should treat digital asset rewards generated through blockchain validation.

Why does it matter?

The bill could shape how mining and staking rewards are taxed in the United States, affecting validators, miners, investors and institutions using blockchain networks. The debate is also about more than timing: it raises questions over whether digital assets should follow existing income-tax concepts or receive tailored rules reflecting how tokens are created, held and monetised. For the crypto industry, clearer rules could reduce compliance uncertainty; for critics, deferral may raise concerns over preferential treatment compared with other financial products.

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Bank of England drops stablecoin holding limits in revised framework

The Bank of England has revised its proposed regulatory approach for sterling-denominated systemic stablecoins, removing planned individual holding limits and introducing a temporary £40 billion issuance guardrail for each systemic stablecoin.

The policy statement and draft Code of Practice set out how the Bank intends to regulate stablecoin issuers that become systemic because their use in payments could pose risks to UK financial stability. The final Code of Practice is expected by the end of 2026.

The Bank said it had changed its approach following industry feedback on two key issues: backing asset composition and holding limits. Earlier proposals would have imposed individual limits of £20,000 per coin for individuals and £10 million for businesses, with possible exemptions.

Instead, the Bank now plans to use a temporary issuance guardrail, initially set at £40 billion per systemic stablecoin. The Bank said the approach would be simpler to implement while still managing credit risks as stablecoins scale.

Backing asset rules have also been adjusted. The Bank now proposes a steady-state backing asset composition of 70% short-term UK government debt and 30% unremunerated Bank of England deposits, compared with an earlier 60/40 proposal. It said the change should support more viable stablecoin business models while maintaining safeguards for financial stability.

The framework forms part of the UK’s wider stablecoin regime, under which the FCA will regulate qualifying stablecoin issuance, custody and trading, while systemic stablecoins recognised by HM Treasury will be regulated jointly by the Bank and the FCA.

The Bank said the approach is intended to support innovation and market entry while preserving trust in money, safeguarding financial stability and enabling sterling-denominated stablecoins to operate at scale.

Why does it matter?

The Bank of England’s revised approach shows the UK trying to make systemic stablecoin regulation more workable without abandoning financial stability safeguards. Removing individual holding limits addresses a major industry concern, while the £40 billion issuance guardrail keeps regulatory focus on systemic scale rather than day-to-day user holdings. The framework also matters because stablecoins are being treated as part of the UK’s future payments landscape, alongside bank deposits, tokenised deposits and potentially a retail CBDC.

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EU introduces updated crypto anti-money laundering framework for 2027

The European Union has adopted new anti-money laundering (AML) rules that will prohibit regulated crypto-asset service providers from supporting privacy-focused cryptocurrencies from July 2027. The measures form part of a broader effort to strengthen oversight of financial activities considered vulnerable to money laundering and illicit finance.

Under the framework, crypto-asset service providers, including exchanges and custodians, will be required to apply enhanced customer due diligence measures to occasional crypto transactions valued at €1,000 or more. Anonymous crypto accounts and services designed to increase transaction anonymity will also be banned within the regulated sector.

Despite the stricter requirements, direct transfers between self-hosted crypto wallets will not be subject to mandatory identity verification obligations. Customer identification obligations will apply primarily when regulated intermediaries are involved, while peer-to-peer transactions conducted without such entities remain outside the scope of the rules.

Beyond digital assets, the regulation introduces a €10,000 cap on commercial cash payments across the EU and expands AML obligations to additional sectors, including professional football, crowdfunding platforms, luxury goods dealers, and investment migration businesses.

New beneficial ownership disclosure requirements will also apply to companies, trusts, and certain non-EU entities operating within the EU.

Why does it matter?

The reforms represent one of the EU’s most significant efforts to create a unified anti-money laundering framework across member states. By introducing common standards for crypto-assets, cash transactions, beneficial ownership transparency and customer due diligence, the rules aim to reduce regulatory fragmentation and strengthen the bloc’s ability to detect and prevent illicit financial activity.

The measures also signal the continued integration of crypto-assets into mainstream financial regulation. While the EU is imposing stricter requirements on regulated intermediaries and anonymity-enhancing services, it is maintaining a distinction between supervised financial activity and peer-to-peer transactions involving self-hosted wallets. The balance struck by the framework may influence future AML approaches in other jurisdictions seeking to regulate digital assets while preserving elements of decentralised finance.

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Japanese retirement fund explores crypto diversification strategy

A Japanese corporate pension fund is reportedly planning to allocate around 1% of its assets to cryptocurrencies from fiscal 2026, in a small but notable step towards digital asset exposure in traditional investment portfolios.

The National Business Corporate Pension Fund, based in Okayama, manages about ¥21.3 billion in assets for roughly 1,200 small and medium-sized enterprises, according to local media reports cited by crypto industry outlets.

The planned allocation would reportedly be made through a passive crypto fund managed by a hedge fund. It forms part of a broader portfolio adjustment aimed at diversifying currency exposure and reducing reliance on yen-denominated assets.

Reported changes for fiscal 2026 include reducing yen holdings while increasing exposure to other currencies, gold and crypto assets.

The move comes as Japan’s financial sector explores a wider role for digital assets. Recent policy developments include legislative efforts to bring crypto assets under the Financial Instruments and Exchange Act, while major Japanese banks are preparing live commercial transactions using a jointly issued stablecoin during fiscal 2026.

The pension fund’s proposed allocation remains small, but it suggests that digital assets are beginning to enter some long-term investment discussions in Japan’s institutional finance sector.

Why does it matter?

The reported allocation is small, but it points to a gradual normalisation of crypto as a diversification tool among some institutional investors. For pension funds, even limited exposure raises questions about risk management, fiduciary duties, volatility, custody and regulatory clarity. In Japan, the story also fits a broader shift towards treating digital assets as part of the regulated financial system, rather than only as speculative retail products.

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Ireland strengthens AML framework with focus on crypto-asset risks

Ireland has launched a new National Risk Assessment and a 30-point action plan aimed at strengthening its response to money laundering, terrorist financing, and proliferation financing risks. The framework identifies crypto-assets as a significant emerging vulnerability, reflecting their increasing use in complex and cross-border financial crime schemes.

The action plan introduces enhanced safeguards for digital finance, including stricter due diligence requirements when crypto-assets are used as a source of funds. The Gambling Regulatory Authority of Ireland has been tasked with developing standards to ensure firms verify the legitimacy and origin of crypto-related funds, with implementation expected by 2027.

Authorities also plan to strengthen supervisory powers, improve transparency around beneficial ownership and enhance coordination between financial crime and tax enforcement bodies. The approach targets evolving criminal methods combining cash-based laundering with digital tools, including crypto-assets and cross-border layering techniques.

The initiative also forms part of Ireland’s preparation for its 2028 international anti-money laundering evaluation.

Why does it matter?

The new framework reflects a broader regulatory shift toward treating crypto-assets as embedded components of financial crime risk rather than isolated instruments. By integrating digital asset controls into its AML framework, Ireland is improving detection of hybrid laundering schemes combining cash flows with blockchain transfers and aligning with international assessments.

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Sweden warns of growing criminal exploitation of digital payment systems

Sweden’s financial regulator, Finansinspektionen, has warned that organised criminal networks are increasingly exploiting weaknesses in payment systems and digital banking infrastructure. The assessment points to a more challenging risk environment driven by faster transactions, cross-border financial flows and increasing technological complexity.

Financial institutions across the Nordic region are expected to adopt more proactive and intelligence-led compliance approaches.

Retail banks remain primary targets because of their high transaction volumes and role in the initial placement of illicit funds. Criminals rely on shell companies and layered ownership structures to conceal beneficial ownership and bypass standard due diligence.

Regulators now expect stronger analytical capabilities and more robust identity verification processes, particularly within automated onboarding systems that may be vulnerable to fraud and mule-account creation.

Payment service providers and crypto-asset platforms are facing increased scrutiny because they enable the rapid movement of funds across jurisdictions. Authorities stress that real-time screening is now essential, as post-transaction analysis is no longer sufficient.

Crypto-related risks are amplified by mixing tools and decentralised systems, requiring strict origin-of-wealth checks and full compliance with travel rule standards.

Supervisory findings also highlight risks from professional enablers and compromised SMEs used to bypass controls. Insider involvement and distressed businesses can mask illicit activity through seemingly legitimate operations.

Finansinspektionen said stronger sanctions screening, continuous monitoring, and executive-level compliance oversight are essential to address evolving money laundering and illicit financing risks.

Why does it matter?

The warning reflects a broader shift in financial crime, where criminal organisations increasingly exploit the speed, scale and interconnected nature of modern financial systems. As digital payments, instant transfers and crypto-assets become more widely used, traditional compliance approaches based on retrospective reviews may struggle to keep pace with rapidly moving illicit funds.

The assessment also highlights the growing convergence of financial regulation, cybersecurity and digital governance. Financial institutions are increasingly expected to deploy advanced analytics, real-time monitoring and stronger identity verification controls to detect criminal activity before transactions are completed. Similar regulatory trends are emerging across Europe and other jurisdictions as authorities seek to strengthen resilience against money laundering, fraud and sanctions evasion.

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Stablecoin issuers face new customer verification requirements under the US GENIUS Act

US financial regulators have proposed new rules requiring certain payment stablecoin issuers to implement bank-style customer identification programmes under the GENIUS Act framework. The proposal would classify permitted stablecoin issuers as financial institutions under the Bank Secrecy Act, expanding compliance obligations to include customer identity verification and anti-money laundering (AML) controls.

Under the joint proposal issued by the Federal Reserve and other federal financial regulators, issuers would be required to collect and verify key customer information, including names, addresses, dates of birth and identification numbers before opening accounts.

Issuers would also be required to adopt risk-based procedures that enable them to reasonably verify customer identities based on their business model, operational scale and onboarding processes.

Regulators clarified that customer identification requirements would apply only to direct relationships between users and issuers, including issuance, redemption, custody and reserve-management services. Secondary market transactions, including user transfers and intermediary activity, would generally fall outside these obligations due to enforcement limitations.

The proposal is now open for public consultation and forms part of wider discussions on the interaction between federal and state regulatory frameworks under the GENIUS Act.

Why does it matter?

The proposal marks another step in integrating stablecoins into the mainstream financial regulatory framework. By applying customer identification and anti-money laundering requirements at the issuer level, regulators are seeking to reduce financial crime risks while allowing stablecoins to operate as regulated payment instruments.

The distinction between direct issuer relationships and secondary-market transactions is also significant. It reflects an attempt to balance compliance requirements with the decentralised nature of blockchain networks, where peer-to-peer transfers and intermediary activity can be difficult to monitor directly. The outcome of the consultation could help shape the future regulatory architecture for digital dollars and influence stablecoin oversight in other jurisdictions.

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Oman launches mandatory national Bitcoin mining pool

Oman has introduced a mandatory state-backed Bitcoin mining pool under its digital asset strategy, requiring all licensed miners to operate through a single national platform. The initiative reflects a broader effort to formalise and centralise crypto mining within a regulated framework while expanding Oman’s industrial-scale digital economy.

The national pool, Omanhash.com, was launched by the Ministry of Transport, Communications and Information Technology in partnership with Frontier Technologies LLC and supported by infrastructure provider Enegix Global.

The platform is expected to aggregate substantial computing power, giving authorities greater visibility into mining output, energy consumption and Bitcoin production within the country.

The framework consolidates existing mining investments that have reached hundreds of millions of dollars in recent years, including large-scale data centre developments in the Salalah Free Zone.

Rather than restricting mining activity, the model integrates it into a controlled national framework designed to support regulatory oversight, reporting and compliance.

Industry participants describe the model as a sovereign mining framework already tested in other jurisdictions, where similar pool structures have been used to integrate taxation and compliance monitoring into mining operations.

Why does it matter?

Oman’s approach represents a notable evolution in how governments engage with cryptocurrency mining. Instead of treating Bitcoin mining as a largely private activity regulated from the outside, the country is integrating mining operations into a state-supervised framework that provides greater visibility over production, energy use and economic activity.

The initiative also raises broader questions about the future relationship between decentralised technologies and state governance. If similar models are adopted elsewhere, governments could gain a more active role in monitoring and shaping participation in blockchain networks while preserving the economic benefits associated with digital asset industries. The outcome may influence future debates on digital sovereignty, crypto regulation and the balance between decentralisation and regulatory oversight.

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