Page 6 - Aequitas Europa

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At this point it is important to establish that virtual and EU lawmakers, or panic over its mass adoption and
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currencies are not the same as cryptocurrencies. This is implementation is anyone’s guess.
relevant because the regulators should consider a
common taxonomy before enacting laws and regulations At present, the European Commission has taken a
as broad classifications might not work effectively. The permissive approach towards cryptocurrencies, however,
European Commission currently provides a working its development is being closely monitored and regulation
definition for virtual currencies as “a digital is looming. There are genuine concerns regarding money
representation of value that is neither issued by a central laundering and financing terrorism that have prompted
bank or a public authority, nor necessarily attached to a various Member States to propose bills within their
fiat currency, but is accepted by natural or legal persons respective jurisdictions aiming to bring this type of
as means of payment and can be transferred, stored or medium of exchange within the aforementioned Anti-
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traded electronically” , ignoring the 2014 Financial Action Money Laundering and Terrorist Financing legal scope.
Task Force’s key definitions and differentiations of types Participants in illicit transactions must be under this
of digital currencies. The FATF is an independent inter- regulatory umbrella or similar under sound government
governmental body that have the expertise on money structures as such crimes are committed with every fiat
laundering and terrorist financing and promote policies to currency in the world, so cryptocurrencies should not be
protect the global financial system, but the Commission treated any differently in that respect.
decided to go with the banks’ definition instead, which A sense of irony set in when Ilmars Rimsevics, a high
raised eyebrows to say the least. official who represented Latvia on the European Central
Bank general council, had been caught and arrested in
Unsurprisingly, the European Securities and Markets February in a money laundering probe 11 himself by
Authority (ESMA), the European Banking Authority (EBA) accepting bribes from a bank that funneled funds to
and the European Insurance and Occupational Pensions North Korea in breach of international sanctions.
Authority (EIOPA) that collectively are known as European
Supervisory Authorities (ESA) have warned investors on It is anticipated that European Union will have an
the dangers in buying and/or holding cryptocurrencies extremely challenging task on regulating decentralized
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due to its high risk in losing all their funds in this financial technology. Positive regulation is welcomed by an
“bubble”. The motives are really open to many increasing number of crypto enthusiasts, investors and
interpretations, however, it begs the question as to the programmers as real consumer protection is of
efficacy of their oversight of the respective markets that paramount importance in the ecosystem, however, the
these regulators have authority on: what has happened in operating word here is “positive”. Many projects in the
2008 and whether investors and people in general were space are working on smart contracts of self-regulatory
warned at that time. nature on their blockchain protocols that will potentially
Nowadays, the European Central Bank appears conflicted reduce urge of bad actors to use the tech for illicit activity
on the subject. The opinions on the matter often diverge and with the positive cooperation with the Member
from various officials and it really hints that still there is States, the goals set in related EU directives can be
great confusion within, especially when the President achieved.
himself finds it difficult to maintain a solid position on
cryptocurrencies. Mario Draghi admitted in early The European Court of Justice
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February that the ECB could hold positions in bitcoin in
the future (!) after previously stating that the mentioned Legal specialists have suggested that heavy regulation
crypto “is not currency”, nor was not his job to regulate under EU law at infant stage could hamper the innovation
bitcoin. Whether that is to influence the financial markets process and inhibit further evolution brought by this
technology. A neat example was brought by the European
Court of Justice intervention in a case where the

7 https://bitcoinmagazine.com/articles/digital-vs-virtual-currencies- 9 https://www.esma.europa.eu/press-news/esma-news/esas-warn-
1408735507/ consumers-risks-in-buying-virtual-currencies
8 European Commission, p. 30, Proposal for amending Directive (EU) 2015/849 10 https://usethebitcoin.com/ecb-president-mario-draghi-european-banks-
on the prevention of the use of the financial system for the purposes of hold-bitcoin-future/
money laundering or terrorist financing, 2016 11 https://www.msn.com/en-gb/finance/news/ecbs-latvian-representative-
detained-in-bribery-case/ar-BBJl8nj