At a time when terrorism financing is a hot button topic and fiat currencies are floundering in debt and recession, how to handle the world of digital currency is on the table, worldwide. Some nations have chosen to be fertile ground for the innovations available in this sector, while others play defense against the market option, protecting their own weak fiat currency. The greater leadership of the European Union has been watching the market and has come to some early conclusions on how to proceed.
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European nations like The Isle of Man and the United Kingdom have stepped forward to welcome Bitcoin and other cryptocurrencies to attract growth and economic investment. London is looking to become a global economic hub for this new asset class. The entire global digital currency market is valued at $7 billion, a small fraction of the greater economic market that runs in the trillions. From this perspective, the EU’s official stance is to monitor, not regulate Bitcoin and others, for now.
"It's easy to fail when you regulate; you can be too early and too late. From the European Commission's perspective, we are more on the monitoring side," said Olivier Salles, senior financing services official for the European Union, told a hearing on virtual currencies in the European Parliament. "We want to understand better what is happening.”
Money laundering relating to crime and terrorism is the main focus of regulators right now in the region, and Bitcoin has been proven not to be a major criminal factor. In fact, it is particularly low in such crime, relative to banking transactions and cash, as the chart below from Britain’s HM Treasury proves. Months were spent analyzing where funding for terrorism and money laundering comes from, and digital currencies are not a factor. (Here is the report in its entirety.)
Nations, like Great Britain that has been more open-minded and less restrictive when it comes to new economic options, are reaping the rewards of innovation. Large global banks and multi-national corporations seem more interested in Bitcoin’s blockchain technology and how it can serve them than any perceived threat from the digital currency itself. And the top Bitcoin providers have fallen in line with common regulatory practices, further reducing the need for EU oversight.
"They are putting in regulatory capital, they are already registered with the regulators, by and large,” said Jeremy Millar of technology consultants Magister Advisors to Reuters. “If the companies and the activities are already regulated, I don't know what it means to regulate the technology.”