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European Union: Central Bank Board Member Speaks on Bitcoin

(June 6, 2014) On May 19, 2014, Yves Mersch, an executive board member of the European Central Bank, in a speech given to Cash Symposium 2014, in Germany, argued in favor of the superiority of the euro as a form of payment in comparison with virtual currencies such as Bitcoin. He commented that consumers have a difficult time understanding how Bitcoin works as a medium of exchange, given the murky legal and security aspects of the Bitcoin market. He acknowledged that the absence of transaction fees makes Bitcoin attractive to consumers, but emphasized that the “exchange rate losses can quickly cancel out this advantage.” (Stan Higgins, European Central Bank: Bitcoin a Risky Alternative to Euro, COINDESK (May 21, 2014).)


Thus far, the European Union has not adopted any specific legislation on the status of Bitcoin as an emerging virtual currency. On February 28, 2014, the European Banking Authority (EBA), the regulatory agency of the EU in charge of advising EU institutions on banking, e-money regulation, and payments, in its 2014 report on consumer trends, raised the question of whether virtual currencies ought to be regulated and announced that it intends to establish a cross-sector task force to examine this issue. (EUROPEAN BANKING AUTHORITY, EBA CONSUMER TRENDS REPORT 2014, EBA website (Feb. 28, 2014).)

The task force, which will convene in 2014, will be tasked with identifying not only the dangers for consumers arising from virtual currencies as a means of payment but also the risks that may arise for the following stakeholders:

· regulators, who may be hampered in their efforts to achieve anti-money laundering goals due to the anonymity of virtual currencies;
· investors, if they use virtual currencies for speculative purposes or to purchase investment-related products traded by means of or based on virtual currencies; and
· society at large, which may be adversely affected when virtual currencies are used for criminal activities, such as purchases of drugs or weapons. (Id.)