In an apparent attempt to hedge its risks the European Union is reported pondering applicability of its regulatory framework to the latest wave of financial technologies including cryptocurrencies and initial coin offerings (ICO). According to a document seen by Bloomberg, the European Commission intends to "assess the applicability" of the EU regulation to such Financial Instruments as part of its wider plans to regulate FinTech. In addition, the EU executive body is planning to hold in the second quarter of 2018 a roundtable discussion on challenges and opportunities related to this emerging market.
Wild West
Some experts see the current dearth of relevant regulation as leaving the door open to abuse going as far as fraud and money laundering. Markus Ferber MEP was quoted as saying that even though there are more than 1,500 virtual currencies already in circulation; "from a regulatory point of view they are still the Wild West." He believes that bitcoin and alike must be classified by the commission as full-fledged financial instruments which may help to make the virtual currency market less volatile. Financial experts point out at inherent value virtual currencies represent as a viable alternative to government-run monies. They suggest additional safety measures and more infrastructural supports need to be introduced for bitcoin trading which is said to suffer from low trading volumes and a large number of hobbyist traders present in the immature market.
Cryptocurrencies: hype abating as their value plunges
The excitement about Digital Currencies appears to be past its high point as bitcoin, the world's leading cryptocurrency sunk below $8,000 last week, almost a 60 percent plunge from the all-time high of nearly $20,000 it achieved in December last year. This was followed by Ethereum and Ripple, two of its major rivals losing value significantly in the past two weeks.
After the European Central Bank and the European Securities Markets Authority issued warnings about the speculative environment for cryptocurrencies and ICOs and their potential for loss, the European Commission expressed its desire to bring in a relevant regulatory framework for virtual currencies and ICOs. Cnet speculated that digital currencies may be dragged down by tougher regulation recently introduced by governments in China, India and South Korea.
A week ago Facebook banned advertising of cryptocurrencies and initial coin offerings, citing as a reason that such ads are "frequently associated with misleading or deceptive promotional practices."
The novelty of Bitcoin
Despite the setbacks it encountered in the recent weeks, bitcoin still remains up sharply from $1,000 it was trading at the beginning 2017. This value may still be seen by many enthusiasts as evidence of ample trading potential remaining in the leading digital currency, while experts warn bitcoin is likely to remain extremely volatile as it continues to develop. Karthik Kannan, a management professor at Purdue University's Krannert School of Management compared the ongoing virtual currency hype to the dotcom boom some twenty years ago, when; "the bubble disappeared but the e-commerce didn't disappear." He believes that even after the novelty of bitcoin wears off, it will retain at least some of its ability to disrupt the banking and finance sector.
