Banking watchdog to set up virtual currency taskforce

Banking watchdog to set up virtual currency taskforce

The European Banking Authority is to assemble a taskforce to determine whether virtual currencies should be regulated.

The EU regulatory body in December issued a warning to consumers of the risks relating to virtual currencies. Several national supervisors followed suit and published statements on their own Websites and/or cross-referenced the EBA warning.

In its latest consumer trends report, the EBA says the question yet to be addressed is whether virtual currencies "can and ought to be" regulated. To that end, the banking watchdog is to establish a "cross-sectoral taskforce" in H1 2014, with the aim of finding an answer to this question.

The analysis would see the taskforce identifying not only the risks for consumers of using virtual currencies as a means of payment, but also risks that may arise for regulators in achieving their anti-money laundering objectives, "given that the anonymous nature of virtual currencies is conducive to this type of activity".

It will also look at the risks posed to investors from using virtual currencies for speculative purposes or from buying investment products that are based on virtual currencies, such as ETFs using Bitcoins as an underlying asset.

The taskforce will additionally examine the societal strains posed by the use of virtual currencies for criminal purposes, such as the anonymous purchase of illegal goods, including drugs and weapons.

The EBA's action follows the recent bankruptcy of the world's biggest bitcoin exchange MT Gox, and yesterday's announcement by Alberta-based 'bitcoin bank' that it was shutting up shop in the wake of a cybertheft that saw criminals make of with $600,000 worth of bitcoins.

In the wake of the MT Gox meltdown, the Japanese government on Friday is set to hammer out new regulations governing the use of bitcoins. A source quoted by Reuters says that under the draft plans, banks and securities firms will not be able to handle bitcoin as part of their main business, suggesting the crypto-currency will be treated more as a commodity, like gold.

Read the full EBA report:

Download the document now 844 kb (PDF File)

Comments: (2)

A Finextra member
A Finextra member 05 March, 2014, 12:34Be the first to give this comment the thumbs up 0 likes

If a physical currency is subject to regulation, why not a virtual one?

Russell Bell
Russell Bell - Fastbase Ltd - Wellington 06 March, 2014, 04:35Be the first to give this comment the thumbs up 0 likes

Physical currencies are regulated by the country that issues them.  If a virtual currency is issued and controlled by a single entity, it can be regulated by whichever jurisdiction that entity is within.  But a peer-to-peer currency without a central issuer, that's more complicated.