The European Commission signalled it will try to impose rules on virtual currencies, such as Bitcoin, after the bloc’s banking regulator ordered lenders to shun them.
“It’s imperative to move quickly on this issue,” Chantal Hughes, a spokeswoman for financial services commissioner Michel Barnier, said Friday. “The potential for money laundering and terrorist financing is too serious to ignore.”
The Commission, the EU’s executive arm, moved after the European Banking Authority said banks shouldn’t buy, hold or sell virtual currencies until regulators develop safeguards to protect their integrity. The watchdog identified more than 70 risks linked to the currencies ranging from identity theft to the possibility hackers could target a trading platform.
Virtual currencies have come under increased scrutiny from regulators and prosecutors around the globe. Mt. Gox, once the world’s biggest Bitcoin exchange, filed for bankruptcy in Japan earlier this year amid claims it lost 850,000 Bitcoins. China’s central bank barred financial firms from handling virtual currency transactions last year.
“Regulators have become alert to the potential for fraud and disruption,” said Richard Reid, a research fellow for finance and regulation at the University of Dundee, Scotland. “Such attention from regulators is bound to curb the growth of markets such as Bitcoin.”