By Jennifer Hanley-Giersch
Cryptocurrencies are seen as bringing innovation to the payments-services sector; furthering financial inclusion; and facilitating greater efficiency in cross-border transactions. However, as with other financial products and services, cryptocurrencies are also exposed to financial crime risks. The following article provides some background in relation to cryptocurrencies in general, and some insights into ongoing regulatory approaches and discussions in Europe.
Innovation and Cryptocurrencies
According to a Reuters article published in February 2018, more than 1,500 cryptocurrencies are active around the world. In addition, hundreds of initial coin offerings (ICOs) who are seeking token buyers aim to join that list over the coming months and years. By market capitalization, Bitcoin (at the time of writing) is the largest blockchain network, followed by Ethereum, Ripple, Bitcoin Cash and Cardano.
Beyond Bitcoin, the wider adoption of cryptocurrencies is still in its infancy but is likely to spread both into the traditional economy as well as throughout the sharing economy in the coming years. In order for mainstream adoption to take place, a regulatory framework, which protects all stakeholders, must also be developed. In the meantime, only minor regulatory steps have been taken, thus regulators regularly warn that investing in cryptocurrencies is high risk. In July 2014, the European Banking Authority (EBA) published an opinion on cryptocurrencies in which it outlines some 70 risks and makes recommendations on how to develop short and long-term regulatory measures to mitigate the risks.
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