European Parliament holds hearing on digital currency regulation

Baozou Commentary : For this European virtual currency hearing, I think a very valuable proposal is "supervision but not regulation". There is no doubt that the regulatory authorities must have concerns about the development of digital currency, but strict supervision of innovative technologies will inevitably have a great impact on the development of new technologies. According to the British government's report, excessive supervision may lead to the development of technology going underground, making it more difficult to regulate. Therefore, the "preventive supervision" proposed this time, rather than strict supervision, creates a more relaxed environment for the development of the industry, which is also something that our domestic regulators can learn from.

Translation: The height difference is full of signals, the naked civet cat

A European Parliament committee held a virtual currency hearing in Brussels today to discuss the possibility of regulating digital currencies in the wake of the recent terrorist attacks in Paris.

The hearing, hosted by the Committee on Economic and Monetary Affairs (ECON), was a preparatory step for the committee to publish a report on virtual currencies. Topics of the meeting included: risks and challenges brought by publicly traded virtual currencies, and the impact of blockchain and distributed ledger technology, the foundation of virtual currencies, on society. The notarial committee included representatives of the European Parliament, representatives of the Organization for Economic Cooperation and Development (OECD), academic representatives, and stakeholders in the private sector.

In his opening remarks, German MEP and Commissioner Jakob von Weizackerm reiterated the purpose of the conference and the significant potential impact of its decisions as governments step up their crackdown on terrorist financing.

Von Weizsackerm said:

“Following the Paris attacks, we are considering whether virtual currencies need to be regulated. We have considered this issue in the past and following this terrorist attack, we are looking at our options.”

However, he pointed out that technology should not be over-regulated as it is still developing, as he sees many potential advantages in new technologies.

Thaer Sabri, regulatory consultant and CEO of the Electronic Money Alliance, recommended a light touch approach to regulation. He also mentioned the Paris attacks in his speech, saying:

“We can’t let the pendulum swing too far.”

Sabri added,

"In terms of financial crime, the financial industry sees regulation as a good thing. If we can't stop criminals from using these products, the products will become discredited."

Jeremy Millar, partner at financial technology consultancy Magister Advisors, countered that because terrorism financing is illegal, the key is detection, not regulation.

Sian Jones, founder of the European Digital Currency and Blockchain Technology Forum and consultant to COINsult, further explained that the claim that virtual currencies are used for money laundering is "overstated" and that the ability to easily track historical transactions makes virtual currencies unsuitable for activities such as money laundering.

ECON is one of a number of European Parliament committees responsible for Economic and Monetary Union, the regulation of financial services, the free movement of funds and payments, tax and competition policy, and the international financial system.

Lighter regulation is needed

After extensive discussions, most participants agreed that the virtual currency and blockchain industries should not be over-regulated for fear of stifling the potential advantages of these new technologies.

Primavera De Filippi, a research scholar at Harvard University's Berkman Center for Internet and Society, believes that the Bitcoin network can be built to be "non-jurisdictional" and people can operate on the network without revealing their identity.

She said:

“This presents an opportunity for criminal activity, tax evasion and money laundering. The real challenge in regulating virtual currencies is how to address the issues of innovation and regulatory imperatives without infringing on consumer interests.”

When it comes to Bitcoin regulation, Millar believes that to some extent, the Bitcoin industry has begun to regulate itself.

He claimed that the overwhelming majority of Bitcoin transactions are done through a small number of companies, such as miners, exchanges and wallet platforms. In addition, most services are based on these platforms.

Given that the industry is already largely institutionalized, he suggests that building relationships with these companies will be far more effective than new rules.

To illustrate how effectively the bitcoin industry is regulating itself, Millar told the committee that following the recent block size debate, it took only a few days for the industry’s major players to hash out a solution.

He said:

“We’ve seen the entire Bitcoin ecosystem come together to collaborate and solve problems facing the industry. ”

Supervision but not regulation

In his conclusion, Von Weizs?ckerm said there is a tendency among regulators to use what they call “precautionary” regulation, which is a challenge for new areas such as virtual currencies that require an open mind.

Instead, he suggested implementing "preventive oversight" so regulators can keep up with industry developments.

Von Weizsäckerm says:

“If the use of blockchain grows exponentially, I’d be happy if our regulators at least understand the technology before it gets really big.”

He explained:

"In the financial sector, if regulators don't understand a business model, there are a lot of risks, for example, a Ponzi scheme, and we don't want to discover it until it's too late."