In order to ‘shield’ financial institutions from the risks posed by virtual currencies such as Bitcoin, the European Banking Authority (EBA) says that they should instead work together with virtual currency firms to promote the innovative technology.
“181. Other things being equal, this immediate response will allow VC schemes to innovate and develop outside of the financial services sector, including the development of solutions that would satisfy regulatory demands of the kind specified above. The immediate response would also still allow financial institutions to maintain, for example, a current account relationship with businesses active in the field of VCs.”
Unfortunately, this is not what the media is reporting. In typical fashion, they are instead simply repeating the Bloomberg article: “EU Banks Must Shun Bitcoin Until Rules in Place, EBA Says”.
This is as far as most people will read, and gives the impression that banks can not deal with bitcoin at all, including bitcoin related business. This isn’t true…
The report focuses heavily on the risks involved in the emerging field. However, if a reporter did some actual work and read into the report they would see that the EBA has in addition to highlighting the risk, points out some very positive aspects of virtual currencies.
Contibution to economic growth
Compared to traditional payment systems with established business actors, VCs have spawned new types of businesses that did not exist before. The use of decentralised VCs offers various new business opportunities. For example, the activity of mining has spawned the development of specialised mining hardware, specialised server farms, commercial mining services such as mining pools, as well as demand for safe storage capacities. Further business opportunities have arisen for exchanges and trade platforms, due to the need to convert VCs into FCs and vice versa. The main focus of innovation opportunities is the IT sector although they may also arise in the financial services sector.”
“The potential benefit is therefore more likely to advantage non-EU countries, especially in the case of money remittances, as VCs offer a less expensive alternative to conventional remittances that cost, on average, 8.36% of the amount sent. Less developed countries may also benefit, for example by linking VC services to mobile payment services, allowing users to exchange their currency into Bitcoins via mobile phone.”
It should actually be of no surprise that a centralized regulatory authority sees mainly the risks of Bitcoin and other virtual currencies. It actually reads like they put a bunch of their interns in a room and said write down all the bad things that can happen with virtual currencies, and threw in some positive notes to make it appear somewhat balanced.
Their job is to regulate, and surprise, they want to enlarge their mandate to regulate more. I would expect more reports like this as they try to expand their sphere of influence.