This week, the European Parliament will debate (Wednesday) and vote (Thursday) on a report on virtual currencies.
First of all, this is a report – not legislation. But it will be handed over to the European Commission for consideration.
It is interesting to see how the EP seems to think that virtual currencies can be regulated and incorporated in existing regulations and legal frameworks. Of course, a new virtual currency can do that. But when it comes to Bitcoin and other existing currencies – I cannot understand how this is supposed to be done. (And it shouldn’t.)
The EP also seems to believe that virtual currencies have some sort of governing bodies, that could be held accountable in front of the EU and national authorities.
On the positive side, the report states that no special legislation for virtual currencies is needed – for the time being. (“More tailor-made legislation might be needed.”)
Here are some parts of the report that might be of interest. (VC = virtual currencies. DLT = distributed ledger technology = Blockchain.)
19. Welcomes the Commission’s suggestions for including VC exchange platforms in the Anti-Money-Laundering Directive (AMLD) in order to end the anonymity associated with such platforms; expects that any proposal in this regard will be targeted, justified by means of a full analysis of the risks associated with VCs, and based on a thorough impact assessment;
20. Recommends that the Commission draw up a comprehensive analysis of VCs and, on the basis of this assessment, consider, if appropriate, revising the relevant EU legislation on payments, including the Payment Accounts Directive (PAD), the Payment Services Directive (PSD) and the Electronic Money Directive (EMD), in light of the new possibilities afforded by new technological developments including VCs and DLT, with a view to further enhancing competition and lowering transaction costs, including by means of enhanced interoperability and possibly also via the promotion of a universal and non-proprietary electronic wallet;
21. Observes that several virtual local currencies have been created in Europe, not least as a response to the financial crises and the related credit crunch problems; urges particular caution when defining virtual currencies, in the context of any future legislative proposals, with a view to taking proper account of the existence of ‘local currencies’ of a not-for-profit nature, often having limited fungibility and providing significant social and environmental benefits, and to preventing disproportionate regulation in this area, as long as taxation is neither avoided nor circumvented;
22.Calls for the creation of a horizontal Task Force DLT (TF DLT) led by the Commission, consisting of technical and regulatory experts, in order to:
i) provide the necessary technical and regulatory expertise across the various sectors of pertinent DLT applications, bring together stakeholders and support the relevant public actors at EU and Member State level in their efforts to monitor DLT use at the European level and globally;
ii) foster awareness and analyse the benefits and risks – including to end-users – of DLT applications in order to make best use of their potential, including by aiming to identify a core set of attributes of DLT schemes conducive to the general interest, such as non-proprietary open standards, and by identifying standards for best practice where such standards are emerging;
iii) support a timely, well-informed and proportionate response to the new opportunities and challenges arising with the introduction of significant DLT applications, including by means of a roadmap for future steps at EU and Member State level which would include an assessment of existing European regulation, with a view to updating it in response to significant and systemic DLT use where appropriate, also addressing consumer protection and systemic challenges;
iv) develop stress tests for all relevant aspects of VCs and other DLT schemes that reach a level of use that would make them systemically important for stability;
23. Stresses the importance of consumer awareness, transparency and trust when using VCs; calls on the Commission to develop, in cooperation with the Member States and the VC industry, guidelines with the aim of guaranteeing that correct, clear and complete information is provided for existing and future VC users, to allow them to make a fully informed choice and thus enhance the transparency of VC schemes in terms of how they are organised and operated and how they distinguish themselves from regulated and supervised payment systems in terms of consumer protection;
The devil is in the details. (My emphasis above.)
Apparently the EP has found something new to regulate. The fact that its’ members don’t seem to grasp the concept of virtual currencies and Blockchain will not stop them. And that is not an unusual approach when it comes to EP reports…
At best this report is a waste of time. But it can be used by the Commission to justify future legislation.