On 17 April, the government of the Czech Republic adopted a new bill proposed by the Ministry of Finance to regulate the digital finance sector. In response to the rapidly evolving cryptocurrency market, the new regulatory framework aims to address emerging challenges and opportunities. It is expected to be finally implemented by the second half of 2024 or by January 2025 at the latest. The new bill will be debated in the House of Representatives.
Alignment with European standards
In line with European standards, the new Czech regulatory framework draws inspiration from the Digital Operational Resilience Act (DORA) and the Markets in Crypto Assets Regulation (MiCA) of the European Union. These regulations aim to ensure greater consumer protection and promote financial stability through a detailed and reliable regulatory approach.
In particular, the MiCA regulation establishes strict criteria for classifying crypto assets into 3 groups, according to their risk and level of regulation, for both issuers and traders. In addition, it requires intermediaries to register in the EU and collect essential data on sellers and buyers in order to prevent money laundering and the evasion of sanctions. Thanks to this standard, authorities will have access to specific transaction data. It can be said that, so far, this is the strictest international standard for cryptocurrency trading on the market. On the other hand, the DORA regulation harmonises the digital operational resilience standards that are fragmented among different directives and regulations.
Innovation in the Czech context
The new Czech legislative scheme focuses on updating the classification of offences and expanding the powers of the Czech National Bank (ČNB). The latter will be responsible for licensing crypto service providers and overseeing regulatory compliance. The ČNB will be responsible for accrediting intermediaries and issuers, who will be required to submit auditor-verified financial statements and periodically assess measures to protect their clients’ assets. In addition, the law sets strict criteria for the professional competence of traders. Issuers will be required to build special capital reserves to ensure financial security and stability in the industry. The ČNB, as the supervisory body, will have the right to impose fines of up to 50 million crowns for violations of the law and prohibit the activities of non-compliant traders. It will also have the task of maintaining a list of issuers authorised to operate, including those who have obtained authorisation to operate in other EU member states.
The Czech Minister of Finance, Zbyněk Stanjura, emphasised that the measures introduced will contribute to the development of the national financial environment, protect consumers and ensure a fair market environment for all cryptocurrency providers. Some measures will enter into force on 30 June, others on 30 December this year, and further provisions on 17 January 2025.
Ultimately, the new regulation adopted by the Czech Republic is a step towards establishing a regulated and safe environment for cryptocurrency trading and investment in the country. This initiative not only aligns with European standards, but also promotes financial stability and consumer protection. By introducing measures to strengthen supervision by the Czech National Bank, the government is showing a commitment to supporting the responsible development of the digital finance sector.
Sources: https://www.ceskenoviny.cz/ https://www.mfcr.cz/cs/ https://www.camic.cz/
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