The European Union said Monday (Jan. 25) that it plans to spend its resources monitoring digital currencies, like bitcoin, instead of formally regulating them, Reuters reported.
Citing that the virtual currency market was “hyped,” the regulatory body said that there’s just not enough known about the currencies to actually form specific regulation to curb issues that have arisen, such as money laundering.
There’s plenty of virtual currencies in the world (600 according to Reuter’s count), and bitcoin accounts for roughly 90 percent of the $7 billion market. But that’s just a dimple in the overall global currency market. Because bitcoin is not supported, regulated or backed by central banks, it’s raised plenty of controversy about how to handle the legality that often arrises from its connection to Dark Web crime.
Mt. Gox, a massive bitcoin exchange that had 850,000 bitcoins lost or stolen (roughly $450 million in value at the time), fell in early 2014. Since then, there’s been a slew of criticism against the virtual currency, with many across the financial industry calling for its regulation.
The problem has been, and appears to still be, one big looming question: How? How can this volatile market be regulated?
The Paris terrorist attacks last November have since sparked more attention toward how to get a hold over bitcoin, as it’s been suspected to have been used to finance terrorism operations. But, for now, it appears the EU will focus on monitoring the currency instead of regulating.
“It’s easy to fail when you regulate — you can be too early and too late. From the European Commission’s perspective, we are more on the monitoring side,” Olivier Salles, a European Commission senior financial services, stated. “We want to understand better what is happening … We are not in a hurry [to regulate the virtual currency industry].”
But some in the industry have called for regulation. Sean Ennis, an economist at the OECD club of rich nations, who was cited by Reuters, said the EU should examine what Britain has done with its regulatory oversight of P2P lending, which enabled the industry to grow instead of being stunted.
“I am very modest about the potential for regulation,” Ennis said.
But, for now, it appears the EU won’t regulate the virtual currency until it knows more about how it exactly impacts the overall financial ecosystem and what potential it may hold. That’s the question that remains on the table. And one that many FIs and regulatory bodies across the world are trying to figure out.