European Banking Federation: EU Legislators Should Regulate Cryptocurrencies
The European Banking Federation, a major European banking trade group representing the continent’s banking industry, has released the “EBF blueprint for digital banking and policy change” report. The report recommends that European Union legislators regulate cryptocurrencies in order to avoid bitcoin-related Ponzi schemes and fraud.
The EBF highlights the clear advantages of blockchain technology and its application in the traditional financial sector, its platforms and banking systems. Specifically, the report emphasizes the blockchain network’s ability to settle assets and smart contracts efficiently.
The blockchain network has the potential to cut significant sections of banks and financial institutions’ costs in maintaining and developing banking and financial platforms. The transparent and decentralized nature of the blockchain network enables anyone to track, search and verify transactions or asset settlements instantly.
”Using such technology offers clear opportunities to reduce costs of moving and handling money, to secure consumer spending, and to introduce greater liquidity to the market. It also improves offers of products and services and increases banks’ velocity in all their activities,” said the EBF.
However, the federation states that bitcoin is still far away from being recognized as a “currency.” Unlike government-issued and centralized money, bitcoin cannot be controlled and regulated in an event of hacking incidents, data breaches and Ponzi schemes.
“Crypto-technologies are still in a building phase due to the lack of common approach and uniform platform. For example, when looking at crypto-currency schemes, we have to observe that many of these have not yet achieved the maturity levels that would otherwise be expected from a currency. For example, they do not offer consumers the same level of protection as the currency made legal tender through government decree. ‘Bitcoin’ crypto-currency represents probably one of the most well-known examples of crypto-technology. However, its future as a currency is unclear, given that it was built as an experiment,” says a section of the report.
Despite the federation’s optimistic view towards the technological potential of the blockchain technology and bitcoin, the EBF states that the European Banking Authority (EBA) is highly concerned about the increase in emergence of crypto-currency schemes. The EBA identified 70 risks of crypto-currency schemes in a publication released in 2014, to alert regulatory bodies and financial organizations about the possibility of insecurity and instability in relying on cryptocurrencies for trading securities, assets and derivatives.
Due to the above-mentioned risks, the “EBA recommended that EU legislators consider declaring market participants at the direct interface between conventional and virtual currencies (e.g. virtual currency exchanges), to become “obliged entities” under the EU Anti-Money Laundering Directive and thus subject to its anti-money laundering and counter-terrorist financing requirements,” the report read.