EU says it is ready to regulate cryptocurrencies

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fintech insurtech wealthtech regtech ai cybertech esg news

The European Union has warned that it will regulate cryptocurrencies if an effort is not made to tackle risk.

While many investors have capitalised on the global boom in cryptocurrencies to make millions, others have suffered heavy losses and there is increasing concern of the potential for them to be used in crime.

Valdis Dombrovskis, the EU’s financial chief, said that worldwide measures were needed if European regulation was to be avoided.

Speaking to reporters after a roundtable event, Dombrovskis said: “This is a global phenomenon and it’s important there is an international follow-up at the global level. We do not exclude the possibility to move ahead [with cryptocurrency regulation] at the EU level if we see, for example, risks emerging but no clear international response emerging.”
He was speaking after hosting a roundtable meeting attended by the European Central Bank, industry bodies and the Financial Stability Board, which writes and coordinates regulation for the Group of 20 Economies.

The roundtable focused on three main topics: the implications of crypto-currencies for financial markets, the risks and the opportunities associated with their use, and the recent development of Initial Coin Offerings.

It concluded that crypto-currencies, which are not currencies in the traditional sense, and whose value is not guaranteed, exposes consumers and investors to substantial risk including the risk to lose their investment.

While Initial Coin Offerings have become a way for innovative firms to raise substantial amounts of funding, the roundtable added that they also expose investors to substantial risk, such as the lack of transparency regarding the identity of the issuers and underlying business plans.

It also expressed the need to assess further under what circumstances crypto-currencies and related services are covered by existing regulation.
Based on the assessment of risks and opportunities and the suitability of the existing regulatory framework for these instruments, the Commission said it will determine if regulatory action at EU level is required.

With crypto-assets presenting risks relating to money laundering and the financing of illicit activities, the Commission also proposed that virtual currency exchanges and wallet providers should be subject to the Anti-Money Laundering Directive.

“On its own, Europe represents only a small share of global cryptocurrency trading, so we need to work together with our partners in the G20 and international standard-setters,” Dombrovskis added.

Earlier this year, the Securities and Exchange Commission filed charges against a former cryptocurrency exchange and its founder.  The SEC also recently put the brakes on an initial coin offering (ICO) that was seeking to raise up to $1bn to develop ‘‎the world’s first decentralized bank’.

Copyright © 2018 RegTech Analyst

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