#Cryptocurrencies: To use or refuse?

| December 1, 2017 | 0 Comments

On November 29 bitcoin has cracked another record by reaching $11 000 in price. The largest digital currency has risen to a staggering amount of more than 1,000 percent this year. This has increased total cryptocurrencies capitalization to $300 billion, including $161bn bitcoin capitalization. Second largest digital currency Etherium owns another $46bn of the total share.

The ever-growing cryptocurrencies’ growth rate is directly connected with digital fund-raising campaigns (initial coin offerings, ICO). More than 200 of them took place while 10 months of 2017, with the total amount of investments around $3.5bn.

Regulating bodies pay more attention as the amount of blockchain transactions increases both on national and transnational levels. Global stance with regard to the digital currencies slightly varies: Gibraltar, Isle of Man, Cayman Islands, and Mauritius are the open partisans of the cryptocurrencies development, while others like China, South Korea and Vietnam ban internal circulation of digital money.

The European Union haven’t yet developed a common approach towards the regulation of crypto currencies and ICO procedures, but national and European bodies consider development of the private investors and national economies fraud and speculation safety frameworks.

Bank of France governor Francois Villeroy de Galhau said in June that no public institution can provide Bitcoin’s confidence, mean those who use cryptocurrencies today do so at their own risk. Bundesbank board member Carl-Ludwig Thiele described digital currencies and Bitcoin as more of a speculative plaything than a form of payment. At the same time, the Bundesbank has been actively studying the application of the blockchain technology in its payment systems due to the PSD2 directive coming into effect. De Nederlandsche Bank, the central bank of the Netherlands, therewith created its own cryptocurrency called DNBcoin for internal circulation to understand how it works and then cited blockchain might be naturally applicable within the financial transactions system.

Ewald Nowotny, European Central Bank governing council member, mentioned in November that legislators and central bankers are discussing the models of cryptocurrencies regulation. However, actual legal frameworks provide for the ICO projects correspondence with financial and investment regulation. The European Securities and Markets Authority (ESMA) highlighted the risks related in its statements for investors and firms.

“There are the mechanisms that let cryptoinvestors assess potential risks with regard to the ICO projects. The most significant of them is the initial coin offering project’s compliance assessment to the regulatory requirements, including such directives as 2003/71/EC (Prospectus directive), 2015/849/EP (Fourth Money Laundering Directive), 2004/39/EC (Markets in financial instruments directive – MiFID), 2011/61/EU (Alternative Investment Funds Managers Directive – AIFMD),” explained Alexander Zaitsev, executive director of the Threesixty Elements, S.A. investment company that brings to the European market RAISON, the AI-based mobile platform designed to handle investments and personal finance.

“Other factors that may approve ICO project’s due diligence are the expert executors team and elaborated step by step action plan described in comprehensive white-paper document,” added Zaitsev. “In addition to that, it is worth reminding that venture investments are connected with risks and projects that hold large income promises in short time periods are the junk ones a priori. Reasoned approach and thorough project background examination are vital to secure crypto investments.”

Thus, developer’s accountability to the financial regulatory frameworks and professional advisor engagement are the parts of a simple strategy that will secure European ICO projects investments within the operational EU legal system.

International expert community and digital currencies market players suppose that the global trend for the common regulative approach development is answering current needs and may play crucial role in securing cryptoinvestors’ interests. According to the chief executive officer at U.S. Global Investors, one of the largest international technological investment firms, society will soon put more trust in digital currencies: “What bitcoin has done, it has woken up everybody to the power of the blockchain technology (the underlying ledger that supports bitcoin), like emails woke everyone up to the internet. At the beginning people didn’t trust the internet.”

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Category: A Frontpage, Banking, Business, Business Information, Digital economy, Economic governance, Economy, Enterprise, EU financial framework, Innovation, Regulations, Single Market

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