European Banking Authority Outlines Potential Regulatory Regime for Digital Currencies

The European Banking Authority (EBA) has issued a statement today, outlining its opinion addressed to the EU Council, the European Commission and the European Parliament and providing its assessment on the conditions under which ‘virtual currencies' should be regulated. The issued opinion, advises the above mentioned institutions to discourage financial institutions from buying, holding or selling digital currencies until a regulatory framework is in place.

The assessment has been conducted in conjunction with the European Central Bank (ECB) and the European Securities and Markets Authority (ESMA ESMA European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t European Securities and Markets Authority (ESMA) is an independent Authority of the European Union that is responsible for the safety, security, and stability of the European Unions’ financial system and is charged with protecting the public. The European supervisory authority for the securities sector, ESMA was established on 1 January 2011. The European Securities and Markets Authority is an independent EU authority based in Paris. It aims to contribute to the effectiveness and stability of t Read this Term). While potential benefits from virtual currencies were identified relating to faster and cheaper transactions, and financial inclusion, according to the opinion, risks are outweighing the benefits.

The causes for the risks include the ease of creation of a virtual currency scheme, which can be created anonymously by anyone with a sufficient share of computational power. The EBA has also stated that miners of digital currencies who are supposed to validate transactions, payers and payees can also remain anonymous.

Unsurprisingly one of the biggest perks of the digital currency movement is one of the most important risks in the eyes of European authorities. The discouragement of financial institutions to deal with digital currencies is mostly targeting the time until there is no substantial body of Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term, which would require a lot of time to get developed, especially having in mind the pace of decision making at the European level.

According to the statement by the EBA, "a regulatory approach would need to cover governance requirements for several market participants, the segregation of client accounts, capital requirements and, most importantly, the creation of ‘scheme governing authorities' accountable for the integrity of a particular virtual currency scheme and its key components, including its protocol and transaction ledger."