EU: regulators call for banks momentary avoidance of virtual currencies

Monday 14 July 2014 13:38 CET | News

The European Banking Authority (EBA) has advised European lawmakers and the union’s national financial regulators that they should recommend banks and other payment institutions to stay out of dealings with Bitcoin and other virtual currencies.

EBA has already notified consumers upon no legal guarantees regarding Bitcoin and, recently, stated that digital currencies bear contingent risks which require proper legislation.

Moreover, EBA has listed no less than 70 risks associated with the use of digital currencies. They range from “User is unable to access VCs after losing passwords/key to their e-wallet” and “Market participants suffer losses through information inequality regarding other actors” to “Criminals are able to launder proceeds of crime because they can deposit/transfer VCs anonymously.”

EBA, nonetheless, argues that that virtual currency schemes ought to pass through the hands of a “governance authority” that’s answerable to regulators. Then, the assembly would supervise the integrity of the public ledger, the protocol and the overall components of the digital currency ecosystem.

Still, EBA admits that such a supervising board would not come to terms with the issue of decentralization of the virtual currency protocol and its respective transaction ledger.

EBA continues by stating that if decentralised schemes were secure, market participants would establish themselves as scheme governance authorities.

Then, a legal person may not be invested with authority over market participants which makes one unsuitable for a regulator for compliance purposes and, as such, a regulator may not guarantee integrity for the respective legal persons.

In April 2014, Jeremy Allaire, CEO at Circle, stressed that Bitcoin will become a global payment platform only when governments and regulators will find the synergy between the traditional banking sector and the digital currencies.

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Keywords: EU, regulators, banks, virtual currency, avoidance, Bitcoin, crypto-currency, online sales, regulation
Categories: Payments & Commerce
Countries: World
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