European Commission To Review Existing Cryptocurrency Regulation

News, Regulation | February 28, 2018 By:

European Commission vice president Valdis Dombrovskis said that the EC would assess the existing regulatory framework for cryptocurrencies and accordingly decide whether regulatory action at the European Union level is required.

Dombrovskis made the remarks at the roundtable on cryptocurrencies. The goal of the roundtable was to feed into the EC’s upcoming Action Plan on FinTech, and the EU’s position for a possible discussion at G20 level.

The roundtable attendees, which included the European Central Bank, industry bodies and the Financial Stability Board, believed that the EU must embrace blockchain technology to remain competitive, but remained wary of cryptocurrencies and initial coin offerings (ICO).

“Cryptocurrencies, which are not currencies in the traditional sense and whose value is not guaranteed, have become the subject of considerable speculation.” said Dombrovskis “This exposes consumers and investors to substantial risk, including the risk to lose their investment. This is why warnings about these risks to consumers and investors are important: these must be clear, frequent, and across all jurisdictions.”

Concerning ICOs, the EC vice president acknowledged that it has become a way for innovative firms to raise substantial amounts of funding. However, he said there are also problems that expose investors to substantial risk, such as the lack of transparency regarding the identity of the issuers and underlying business plans.

Dombrovskis said they need to assess further under what circumstances cryptocurrencies and related services are covered by existing regulation. This depends very much on the facts and circumstances around specific cryptocurrencies.

“Based on the assessment of risks and opportunities and the suitability of the existing regulatory framework for these instruments, the commission will determine if regulatory action at EU level is required,” Dombrovskis said.

Dombrovskis concluded that the EC will continue to monitor these markets together with other stakeholders at the EU and international level, including in the G20.

Earlier this month, two G20 members – Germany and France – said that new opportunities arise from cryptocurrencies, but they could pose substantial risks for investors and be vulnerable to financial crime without safeguards. However, there appears to be no strong consensus among G20 members to regulate them closely.