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 Index 
 Full text 
Verbatim report of proceedings
Wednesday, 25 May 2016 - Brussels Revised edition

Virtual currencies (short presentation)
MPphoto
 

  Jakob von Weizsäcker, rapporteur. – Madam President, this the last item of the day and visibly I am speaking not as a backbencher, but really from the last bench in this house. Furthermore, it’s a technical subject; it’s virtual currencies and distributed ledger technology, so one would be forgiven by thinking well, this is a dull and somniferous subject that perhaps will gently put us into sleep at this late hour of the day, but of course one would be wrong, because this new technology has a lot of promise; it has a lot of potential. Some people even liken it to the kind of revolution that was sparked by the introduction of the internet, and I have to say – although not all my fellow shadow rapporteurs are here – we had a very exciting, very interesting and frankly very enjoyable time exploring this particular subject.

Let me briefly explain to you what this is about. Fundamentally what this is about, this distributed ledger technology that underlies the bitcoin, which is the most prominent virtual currency, is a decentralised database that keeps a record of any sort of transaction done within that database in a way that is surprisingly safe, resilient and trustworthy even – and that’s particularly interesting – when there’s no central authority in play. This technology can be used – as the title of the initiative report would suggest – for virtual currencies and in order to reduce the cost of financial transactions significantly.

Some of you may have wondered why it is so much cheaper to send an email or an SMS than to transfer funds, for example from somebody working in one country and sending remittances back home, because in the end this transfer of funds is not much more than an electronic message even today, but still it can be rather expensive – 7% or 8% of the funds transferred. This technology could help us to reduce these transaction costs significantly in the long run, and I think that if we regulate well we might even have open—access electronic wallets where the transfer of funds would be decided by some sort of least—cost routing.

But of course there are also other applications than virtual currencies. You could use this for clearing and settlement, automatic contracts – for example implementing derivatives on the distributed ledger – far beyond the financial sector. You could use it for digital rights management, for music, films or electronic football tickets. If you want to resell these today there might be a danger that you resell them and then the first person who bought them gets into the stadium and the others are kept outside because they bought the same tickets. This is something you could deal with using distributed ledger technology. It could also be an interesting area for government applications – fighting VAT fraud or using it to implement an innovative land register.

Of course, with such new technology it is early days; we are not at a stage where the risks that come with any such technology are systemic. So what we advocate in the report is not to stifle innovation by regulating now, but instead to closely monitor what is going on by the creation of a taskforce which we suggest should be created at the level of the Commission, and then to regulate – if and when the time is right to do so and if and when the structures to do so are in place. That of course doesn’t mean that we shouldn’t do anything right now. For example, in the report we greatly welcome the suggestion of the Commission to apply the Anti—Money Laundering Directive immediately for virtual currencies.

 
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