European Commission Urges Nations to Embrace Blockchain Tech but Address Risks
Following remarks made by Valdis Dombrovskis, vice president of the European Commission (EC), after a roundtable on cryptocurrencies, it appears that the European Union (EU) is prepared to take steps toward regulating cryptocurrencies.
While acknowledging that European nations should embrace blockchain technology in order to remain competitive in financial markets, Dombrovskis also cautioned that they should be taking steps to protect their citizens from hazards in the cryptocurrency space.
“Based on the assessment of risks and opportunities and the suitability of the existing regulatory framework for these instruments [cryptocurrencies and ICOs], the Commission will determine if regulatory action at EU level is required.”
The EC roundtable focused on three specific topics:
- Implications of cryptocurrencies for financial markets
- Risks and opportunities associated with their use
- The recent development of initial coin offerings (ICOs)
Just last month, the EC launched the EU Blockchain Observatory and Forum to consolidate and grow blockchain initiatives within the EU. Over the last couple of months, there have been warnings from EU member states about the potential bitcoin bubble, while conflicting statements about both regulating and not regulating cryptocurrencies have come from those same member states. Today’s announcement from the roundtable seeks to unify a message to feed into their upcoming Action Plan on FinTech and the EU’s position for a possible discussion with the G20. There were five major conclusions that came out of the session.
The first point is that blockchain technology holds a strong promise for financial markets; to remain competitive, the EU must embrace the technology.
Second, cryptocurrencies, which they deemed “not currencies in the traditional sense,” have become the subject of significant speculation, exposing consumers and investors to substantial risk of losing their investment.
This second point leads to the third, which is that warnings about the aforementioned risks to consumers and investors are vital and must be clearly and frequently stated across all jurisdictions.
Fourth, ICOs have become a creative method for companies to raise funding, but this opportunity also comes with high risk to investors due to lack of transparency regarding the issuers’ identities and underlying business plans.
Finally, the EC needs to assess under what circumstances the existing regulation covers cryptocurrencies and related services. This will vary greatly depending on the circumstances around specific crypto-tokens, and the EC will determine if any regulatory action is required at the EU level.
The EC proposes that any virtual currency exchanges or wallet providers be subject to the Anti-Money Laundering Directive. The Commission also suggests that its member states prepare for rapid transposition of this legislation while the EC continues to monitor the markets for changes that might impact their plans.