In a legal opinion recently published by the European Central Bank (ECB), the Union’s apex bank has outlined some of the reasons it thinks the European Union members should not promote the use of digital currencies. Though the ECB recognises that the technological advances relating to the distributed ledger technology underlying alternative means of payment, such as virtual currencies, may have the potential to increase the efficiency, reach and choice of payment and transfer methods, it warned: “…the Union legislative bodies should take care not to appear to promote the use of privately established digital currencies, as such alternative means of payment are neither legally established as currencies, nor do they constitute legal tender issued by central banks and other public authorities.” Some of its other concerns include the higher volatility associated with virtual currencies, which does not always appear to be related to economic or financial factors and the lack of guarantee for holders of virtual currency that they will be able to exchange their units for goods and services or legal currency in the future. Virtual currencies “could affect control” The opinion says: “…the reliance of economic actors on virtual currency units, if substantially increased in the future, could in principle affect the central banks’ control over the supply of money with potential risks to price stability, although under current practice this risk is limited. Thus, while it is appropriate for the Union legislative bodies, consistent with the FATF’s recommendations, to regulate virtual currencies from the anti-money laundering and counter-terrorist financing perspectives, they should not seek in this particular context to promote a wider use of virtual currencies.” The ECB’s opinion is in response to the requests made by the Council and the European Parliament on a proposal for a directive amending Directive (EU) 2015/849 which centres […]
