Sunday

21st Apr 2019

Bitcoin poses 'limited' threat to EU finances

  • The value of bitcoin is more than 20 times what it was a year ago (Photo: Marc van der Chijs)

On Tuesday (12 December), traders were paying around $17,000 (€14,440) for a single bitcoin - more than 20 times its price a year ago.

The virtual currency has received renewed interest since late November, when it passed the €10,000 mark for the first time in its eight-year history.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... or join as a group

  • MEP Antanas Guoga: 'My advice is to wait and see, observe, and then regulate' (Photo: European Parliament)

This has led Ewald Nowotny, a member of the European Central Bank's (ECB) governing council, to say on Monday that because of the scale, "it is certainly increasingly necessary to discuss whether and in what form regulations are needed here".

Some go further. Nobel prize winner Joseph Stiglitz said two weeks ago bitcoin "ought to be outlawed", and that it was only popular because it could be used to circumvent oversight.

But there is not much appetite in Brussels to ban trading in the decentralised cryptocurrency, as China did earlier this year.

"It's just not possible to ban it," Lithuanian MEP Antanas Guoga told EUobserver in an interview.

"China banned it, but the people still use it. You have VPNs. People get around any ban."

Virtual private networks (VPNs) are connections which allow their users to mask their internet use.

Guoga himself has bought bitcoins in the past "to test it out", and he called on his fellow MEPs to do the same to know what they were talking about. He has since sold them all.

"I'm not actively speculating myself," he said. "It's been a good year. So I'm happy to be out."

The centre-right Lithuanian used to be a member of the liberal group, but joined the largest parliament family, the European People's Party in October 2016.

Blockchain vs bitcoin

He said a clear distinction should be made between cryptocurrencies, like bitcoin, and the underlying technology called blockchain.

Blockchain allows its users to record data in a decentralised and distributed way, and is sometimes called distributed ledger technology (DLT).

"We should not mix things up between speculation and cryptocurrency, which … has very little fundamental value, and blockchain technology," said Guoga.

"I'm a big fan of blockchain. I wouldn't say cryptocurrencies, but of blockchain I'm a very big fan," he added.

The blockchain technology could bring many benefits, he said, and replace old ways of doing things.

As an example, Guoga could see people's wills or testaments go on a blockchain. The advantage would be that a copy will also be saved, and changes can be tracked.

"It's obviously is a threat to government, because the more you have these sort of technologies like blockchain, it does take a lot of government functions away," he said.

The Lithuanian therefore believes that it is too early to start regulating blockchain, or even cryptocurrencies like bitcoin.

"My advice is to wait and see, observe, and then regulate," he said.

"The best regulation is just [the] warning that you could lose your money."

Value 'could drop to zero'

Mostly, that is what the EU has done.

Four years ago to the day on Tuesday, the London-based European Banking Authority (EBA) warned Europeans they should be aware of the risks associated with cryptocurrencies "including losing your money".

"The value of your virtual currency can change quickly, and could even drop to zero," the EBA warned.

The EU agency warned not to buy bitcoins with money "that you cannot afford to lose".

The possible risks were highlighted last Thursday, when Slovenian cryptocurrency marketplace NiceHash was hacked. Reuters reported that almost a million bitcoins had been stolen.

The hack followed a similar warning from Finland's Financial Supervisory Authority.

It said that cryptocurrencies were not primarily used as a means to purchase products, but as speculative investments.

"There is no solid foundation to their value formation," the authority said about cryptocurrencies.

"Moreover, no-one pays a real return, such as a dividend or interest, on bitcoin. The expected return is based solely on the expectation that someone will purchase the investment later at a higher price."

The Finns also noted that there is a risk that cryptocurrencies, which allow for anonymity, are used for illegal activities.

Money laundering

This concern is also the main angle which the European Commission has so far focussed upon when it comes to cryptocurrencies.

A 2016 commission proposal to update anti-money laundering rules, which still needs approval by the European Parliament and EU national governments, would require virtual currencies traders to be licensed or registered.

When this website asked the commission to comment on the request for new regulation on bitcoin, it referred to statements made two weeks ago by Valdis Dombrovskis, commissioner for the euro.

"From regulatory point of view, as you know, we do not treat bitcoin as a currency - there is only one currency in the eurozone that is the euro," Dombrovskis told Bloomberg.

"So, it is rather to be treated like a commodity where the price is determined by demand and supply and we are not commenting the price movements here."

Dombrovskis talking to Bloomberg reporters

The former Latvian prime minister noted that the commission saw bitcoin "still as a relatively limited phenomenon".

The European Securities and Markets Authority (ESMA) told this website it did not want to make any comment about bitcoin.

ESMA did confirm that its position on distributed ledgers technologies (DLTs) – or blockchain – had not changed, since a February report came out.

That ESMA report said that DLTs "could bring a number of benefits to securities markets", but that it was "premature to fully appreciate the changes that the technology could bring and the regulatory response that may be needed".

Nevertheless, the bitcoin craze - or bubble - can also have some positive side-effects for government authorities.

The international Southeast European Law Enforcement Center reported last May that Bulgarian authorities seized 213,519 bitcoins, worth $500m at the time.

Cryptocurrency news website Coindesk calculated last week that the seized assets have since risen in value to up to $3bn.

Digital currency, the Airbnb and Uber killer

The digital currency Ethereum allows people to run so-called smart contracts, potentially creating a decentralised sharing economy, and could be the beginning of the end for firms like Uber and Airbnb.

Focus

Estonia tests water for own virtual currency

Following the success of cryptocurrencies, such as Bitcoin, some in the Baltic nation propose introducing their own version for their e-residents. But what about the euro?

Feature

Romania enlists priests to promote euro switchover plan

Romania is due to join the single currency in 2024 - despite currently only meeting one of the four criteria. Now the government in Bucharest is enlisting an unlikely ally to promote the euro to the public: the clergy.

Trump and Kurz: not best friends, after all

The visit of Austrian chancellor Sebastian Kurz to the White House on Wednesday showed that the current rift in transatlantic relations is deepening by the day.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Romania drafts EU code on NGO migrant rescues
  2. Bulgaria, Hungary, and Malta shamed on press unfreedom
  3. EU drafts $20bn US sanctions list in aviation dispute
  4. Brunei defends stoning to death of gay men in EU letter
  5. US Democrats side with Ireland on Brexit
  6. Wifi or 5G to connect EU cars? MEPs weigh in
  7. How Brexit may harm the new EU parliament
  8. EU parliament backs whistleblower law

Stakeholders' Highlights

  1. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  2. Nordic Council of MinistersNordic talks on parental leave at the UN
  3. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  4. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  5. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  6. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  7. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  8. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  9. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  10. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  11. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  12. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov

Stakeholders' Highlights

  1. Nordic Council of MinistersSeminar on disability and user involvement
  2. Nordic Council of MinistersInternational appetite for Nordic food policies
  3. Nordic Council of MinistersNew Nordic Innovation House in Hong Kong
  4. Nordic Council of MinistersNordic Region has chance to become world leader when it comes to start-ups
  5. Nordic Council of MinistersTheresa May: “We will not be turning our backs on the Nordic region”
  6. International Partnership for Human RightsOpen letter to Emmanuel Macron ahead of Uzbek president's visit
  7. International Partnership for Human RightsRaising key human rights concerns during visit of Turkmenistan's foreign minister
  8. Nordic Council of MinistersState of the Nordic Region presented in Brussels
  9. Nordic Council of MinistersThe vital bioeconomy. New issue of “Sustainable Growth the Nordic Way” out now
  10. Nordic Council of MinistersThe Nordic gender effect goes international
  11. Nordic Council of MinistersPaula Lehtomaki from Finland elected as the Council's first female Secretary General
  12. Nordic Council of MinistersNordic design sets the stage at COP24, running a competition for sustainable chairs

Join EUobserver

Support quality EU news

Join us