European Banking Authority Proposes Virtual Currency-Specific Regulatory Body

By September 15, 2016Bitcoin Business

The European Banking Authority (EBA) has advised that the European Commission establish a regulatory regime specific to virtual currencies such as bitcoin. Commenting on the commission’s proposal to amend the existing European anti-money laundering directive, the EBA expresses the opinion that, in the long term, oversight of digital currencies should not fall under regular anti-money laundering provisions, but rather under a specialized EU body. In a response to the commission published by the EBA in August 2016, the banking authority suggests that the existing anti-money laundering directive is “currently not suitable for mitigating all the risks arising from [virtual currency] transactions. Instead, a separate regulatory regime, or more far-reaching amendments […] would be required.” Impact on Bitcoin Addresses and Miners In July 2016, the European Commission published a draft directive , proposing to extend strict anti-money laundering (AML) regulations and “countering the financing of terrorism” (CFT) measures to Bitcoin service providers. Specifically, the directive would apply to virtual currency exchange services and custodial wallet providers. The draft directive also hinted that further regulation may be required in the future to perhaps include Bitcoin address-ownership. The EBA’s response indicates agreement with that assessment and suggests that mining should be subject to oversight as well, stating: “[Virtual currencies] incur additional, technology-specific risks that make them distinct from conventional fiat currencies that are in the scope of [the existing anti-money laundering directive]. So-called ‘51 percent attacks,’ for example, are one such risk, [constituting] a scenario in which a pool of miners attains 51 percent of the computational power with which units of a particular [virtual currency] scheme are mined, which in turn allows that pool to block transactions.” The banking authority therefore says that an amendment to the current anti-money laundering directive may not suffice in the longer term. It argues in […]

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