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EP Debate on Regulating Virtual Currencies and Initial Coin Offerings

On Tuesday the 13th of November, the European Parliament debated in plenary seating the regulation of virtual currencies and initial coin offerings. Common themes of discussion were based on criticism of lack of transparency, opportunity for criminal activity due to anonymity, and the risks consumers face in engaging in crypto assets.

Valdis Dombrovskis, the European Commission Vice-President for the Euro and Social Dialogue, began the debate by addressing the continued excitement for this new paradigm of the internet in the form of a system that could result in overcoming banking intermediaries. He stressed that the terminology proposed by the Commission is not crypto currency but rather crypto assets as according to economists, virtual currencies will never replace actual money. This blockchain technology is promising for the digital economy, however it does pose threats to the consumer and places the EU at risk of money laundering and fraud. The Commission acknowledges that there is currently a legal vacuum that member states are beginning to fill with their own legislation, however it is not high priority.

Markus Ferber, MEP of the largest parliamentary group, the EPP added that crypto currencies have drawn a lot of attention with the promise of revolution, but if a closer look is taken to these promises it can be seen that they are not possible to follow through with. Virtual currencies may provide an interesting topic for speculation, but in reality, they are unregulated and require a European safeguard to be put into place. Another MEP from the same group added that average people are currently investing in something that has no safety procedures set in place, so if things go wrong they could lose everything.

Pervenche Beres, from the Socialists continued that the major concern of crypto currencies lies in the fact that funding has been obtained via crowdfunding even though several regulators rejected the idea that it belongs under the regulation of crowdfunding.

Marisa Matias, from the Greens added that these “new systems” want to provide trust while avoiding control by public authorities, which leaves the EU with the responsibility to impose regulation for the sake of the public interest. Currently crypto currencies are often used for money laundering, so a successful regulation must be put in place to reduce these kinds of operations.

David Coburn from the EFD went to say that the EU seeks to stifle rather than encourage a promising new industry. Crypto currencies may provide an alternative to the failing euro, but if the EU regulates too much this will crush the current development.

Other MEPs were concerned that this new form of private money is attractive for two main reasons; firstly, the speed of transaction and secondly, the anonymity. However, the anonymity creates an opportunity for fraud by hiding the source of funds. Also, a major fear is that criminal activities will flourish due to the lack of legislation.

Overall, it appeared that the European Parliament – though somewhat divided – roams on to regulating the industry, following the general risk-based regulation of the European Union. The participants of this niche market should make themselves heard now, when legislators are still open to hear levelheaded suggestions. We, at Brussels Consulting are constantly working on channeling in arguments that provide benefits for consumers and industry participants. On this particular matter, there is ample space for representing the scenarios.



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