SWIFT: Bitcoin Regulation in the EU Won’t Come Anytime Soon

According to a new report from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), it will take many years for the European Union (EU) to achieve a unified framework for cryptocurrency regulation.

    The report states that there is a lack of compelling reasons to include virtual currencies in the EU’s existing legal framework, set out through the revised Payment Services Directive (PSD2) and the Fourth European Anti-Money Laundering Directive (AMLD4).

    PSD2 was approved by the European Union in October this year and consists of a new set of consumer payment protection rules aimed at promoting the development and use of innovative online and mobile payments.

   Meanwhile, the AMLD4 that has been produced is consistent with the recommendations issued by the Financial Action Task Force (FAFT) in 2012 to strengthen the EU’s anti-money laundering (AML) and counter-terrorist financing (CTF) laws.

The report states:

     “The recent legislative process for AMLD4 and PSD2 has not paid sufficient attention to this development and has generally not addressed virtual currencies. While AMLD4 may be interpreted as extending to virtual currencies, the precise extent to which this will succeed in preventing their misuse for anti-money laundering and terrorism financing purposes remains to be seen.”

     “Third, future legislation, such as the potential EMD3, remains a development to be closely monitored,” the report states, adding:

     “However, in order to extend the potential new legislative framework from e-money to virtual currencies, the concept of e-money would require a fundamental reconfiguration.”

     As multi-purpose prepaid cards begin to lose ground and web-based money services move closer to payment services, the original purpose of the e-money framework is rapidly losing its relevance.

     “Redefining the definition of virtual currencies could breathe new life into the concept and expand the legal framework to include recent developments such as cryptocurrencies,” the report reads.

     The SWIFT Association, an organization established by SWIFT to fund its own research, has already started separate research activities on bitcoin and blockchain technology, receiving grants last July.

     According to the organization, the new working paper is intended to provide recommendations for financial practitioners and regulators.