Written by Christian Scheinert,
This raises questions concerning the possible impact of virtual currencies on a number of sensitive fields. It appears that there is little, if any, influence expected on monetary policy, or on the stability of the financial system. However, some danger might arise for payment systems, including reputational damage for systems which are not directly exposed to virtual currencies. The most problematic field is consumer protection, as there are no safety nets, such as deposit guarantee funds, available to alleviate losses. Extending prudential supervision to virtual currencies might be difficult, if not impossible, so most regulators are now pondering how to regulate the points of contact between virtual currencies and fiat money, i.e. where one is exchanged for the other.
The Paris terrorist attacks in late 2015 have revived interest in virtual currencies, as there is a growing fear that they could be used with criminal intent. The European legal framework will be adapted to take the terrorist threat into account.
For the entire briefing on ‘Virtual currencies: Challenges following their introduction‘ click here.