ECB to EU: Tighter Regulations, Less Anonymity on Digital Currencies

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The European Central Bank (ECB) has given its long-awaited opinion on proposed regulations on digital currencies, including bitcoin. The bank also suggested there’s room for improvement to the European Council and Parliament’s proposal. The aim, it said, is to prevent use of the financial system for money laundering and terrorism financing.

ECB: Tighter Regulations and Less Anonymity

The ECB supported EU lawmakers’ directive requiring digitalecb
currency exchanges to license or register. This includes custodian wallet providers. However, the proposed directive does not address when digital currencies are used without exchange into fiat currencies, the bank added.

They could use digital currency to directly purchase goods and services, which “could provide a means of financing illegal activities,” the ECB wrote.

The bank also claimed some criminal groups can currently conceal their money transfers using digital currencies, benefiting from a degree of anonymity. Referring to digital currencies as “virtual currencies”, they proceeded to draft an amendment to the proposed directive as follows:

“TO COMBAT THE RISKS RELATED TO THE ANONYMITY, NATIONAL FINANCIAL INTELLIGENCE UNITS (FIUS) SHOULD BE ABLE TO ASSOCIATE VIRTUAL CURRENCY ADDRESSES TO THE IDENTITY OF THE OWNER OF VIRTUAL CURRENCIES.”

The bank also proposed that “the possibility to allow users to self-declare to designated authorities on a voluntary basis should be further assessed.”

Don’t Promote Digital Currencies

Next, the ECB urged EU lawmakers to “take care not to appear to
lawmakerspromote the use of privately established digital currencies.”

Regulating digital currencies to prevent money laundering and terrorist financing is appropriate, the Bank explains. However, lawmakers “should not seek in this particular context to promote a wider use of virtual currencies.”

The ECB also stated that digital currencies do not have currency nor legal tender status from public authorities.

Definition Too Close to Fiat

Also, the bank feels existing definition of digital currencies in the proposed directive are not clear enough. “The ECB recommends defining virtual currencies more specifically, in a manner that explicitly clarifies that virtual currencies are not legal currencies or money,” they wrote.

Do you think EU lawmakers will adopt all the amendments suggested by the ECB? Let us know in the comments section below.


Images via S-F / Shutterstock.com, China Daily, ECB