07 Jul 2-tier virtual currencies: regulated & unregulated
Last Friday, the European Banking Authority published its long-awaited Opinion on virtual currencies. There is a brief summary in my last post and I will be posting more in the coming days.
The EBA’s Opinion proposes profound changes to the virtual currency world. In the long term, there will be a two-tier system of regulated and unregulated virtual currencies with only regulated virtual currencies being permitted to interact with other regulated financial services in Europe.
In the short to medium-term, virtual currency gateways such as exchanges will be required to operate compliant anti money laundering and counter terrorist financing systems and restrictions will be imposed on banking, payment and e-money institutions buying, holding or selling virtual currencies. The EBA’s stated intention is to ‘shield’ the existing financial system from virtual currencies until a new regulatory regime is in place.
Although financial institutions are to be ‘discouraged’ from direct involvement in virtual currencies for the time being, they are still to be allowed to maintain current account relationships with virtual currency businesses. How banks will react to the 70 risks identified by the EBA is another matter.
These changes will have significant implications for virtual currency businesses including on costs and business models. At the same time, new opportunities will be created