According to Reuters, the European Central Bank (ECB) is considering regulating the use of digital currencies. Governing council member Ewald Nowotny commented:
“We’re asking ourselves if legislators or central banks should intervene, as happened in China where they banned (the use of cryptocurrencies) because they consider them fraudulent.”
On bans and other schemes
It should be noted that China never banned the use of cryptocurrencies; rather, the country shut down digital currency exchanges and forbade the launching of ICOs. That’s a far cry from a ban on use, which would be impossible to enforce. One also wonders about the wisdom of basing Europe’s regulatory scheme on actions taken by the world’s largest Communist country.
Fortunately, Nowotny realizes that the cryptocurrency market is small enough not to destabilize the traditional financial system. Regulators feel significantly less urgency – and are more inclined to take a laissez faire approach – when there is no risk of systemic collapse. Nowotny further stated:
“It is like buying shares on the bourse … people investing in this product can suffer losses and if that happens, they simply have to accept it.”
Trial and error
Based on the above statement, it’s possible that the ECB could take a “buyer beware” attitude toward digital currencies rather than attempting outright regulation or bans. Governments around the world are struggling to cope with Blockchain technology and the digital currencies it has spawned. Regulators seem to be thoroughly confused, with nations like China taking a highly restrictive approach, but countries like Japan officially making Bitcoin legal money.