In an announcement that was released today, the European Union has stated that it is willing to step in and regulate cryptocurrencies if the risks that are currently associated with virtual currencies are not addressed.
The reason for this sudden decision comes from the erratic price movements that we have seen in Bitcoin in the latter part of 2017, and into early 2018. Although the prices have stabilised now, it resulted in some huge losses for some, and big gains for others. The European Commission VP Valdis Dombrovskis said;
“This is a global phenomenon, and it is important there is an international follow-up at the global level…We do not exclude the possibility to move ahead (by regulating cryptocurrencies) at the EU level if we see, for example, risks emerging but no clear international response emerging.”
Germany and France have both said that cryptocurrencies offer new opportunities, but also come with a lot of risks for investors. They also noted that some regulations need to be introduced in order to prevent them being manipulated by criminals.
The problem that a lot of countries are facing is that despite cryptocurrencies growing in popularity, they actually only represent a very small part of the financial system, and in Europe, there has been no real consensus on how it should be regulated. Many also believe that if too many regulations come in too quickly, it could result in loss of jobs in areas where cryptocurrencies are accepted by the government.
Markus Feber, a European Parliament member, believes that it is important for the EU to put regulations in place sooner rather than later, instead of waiting for rules to slowly develop. He said;
“In order to make sure that retail investors do not fall prey to market manipulation and fraud, virtual currencies should be regulated as other financial instruments.”
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