Virtual Currencies (VCs) and blockchain technology are all the buzz, with their regulation now subject to national as well as international discussions. Following the ESAs warning on VC trading earlier this month (access BETTER FINANCE`s article here), a Roundtable led by European Commission VP Valdis Dombrovskis, in charge of financial stability, financial services and the CMU, was held on Monday.
The Roundtable tackled three main themes: the implication of VCs for financial markets, the risks and the opportunities associated with their use, and the recent development of Initial Coin Offerings (ICOs). Conclusions reached by the Roundtable were presented by Mr Dombrovskis, stating the importance of international dialogue and calling for the EU to embrace innovative solutions to remain competitive. Warnings presented by the ESAs were upheld with Mr Dombrovskis stating that such warnings should be: “clear, frequent, and across all jurisdictions”. While proposing that VC exchanges and wallet providers should be subject to the Anti-Money Laundering Directive, the process is still ongoing to assess under what circumstances and to what extent VCs and related serviced are covered by existing regulation.
While most regulators seek to protect consumers against risks arising from VC trading through tightening regulation, Switzerland represents a stark contrast in its approach to this new trend. With stated aims of becoming a “crypto-nation”, the little village of Zug has become a crypto-hub for ICOs - appropriately named “crypto-valley”. A quarter of the value of last year`s global ICOs ($5bn) was raised in Switzerland, with four of the ten largest ICOs in the world based in Zug. The subject of a recent article by the Economist, Zug gives insight into a world where VCs and the underlying technology are embraced by federal as well as local government. The challenges related to risk and money laundering raised by Mr Dombrovskis at Monday`s Roundtable are acknowledged by Swiss regulator FINMA, currently investigating several ICOs for possible breaches of anti-money laundering rules. In the balancing act that is cost v. benefit with new VCs and blockchain technology, little Zug could be the place to beat, or at the very least learn from, as discussions on EU-wide regulatory measures move forward.