The European Commission has presented a new initiative to explore broader uses of blockchain technology beyond its original role in Bitcoin markets. The technology is used for independently verifying and recording transactions, but has potential wider applications, such as making financial markets faster, more efficient, and more energy-efficient.
On Thursday, the commission said that a blockchain observatory and forum should “play an active role in helping Europe to seize new opportunities”. Consensys, a developer of blockchain applications, will reportedly work with EU officials to gather information, analyse trends, bring experts together, and find new uses for the technology.
The move is part of a wider EU effort to foster the development of financial technology, also known as FinTech. The commission said it aims to develop a regulatory framework that would create an “environment where innovative FinTech products and solutions can be rapidly rolled out across the EU to benefit from the scale economies of the single market”. This includes the benefits of ‘passporting’, which allows companies registered in the European Economic Area (EEA) to do business in any other EEA state without needing additional authorisation in each country.
The commission also intends to “assess the applicability” of the EU’s regulatory framework to cryptocurrencies and initial coin offerings (ICOs), a means of crowdfunding centred on cryptocurrency. The administrative body will organise a roundtable next quarter to discuss challenges and opportunities, which it will report on later in the year.
The news follows the opening of Europe’s first international Blockchain Centre on 27 January in Vilnius, Lithuania. So far, 11 member states have implemented rules governing crowdfunding and similar activities in the absence of EU-wide policies. The commission intends to identify existing divergent licensing requirements and decide whether guidance for national supervisors or an EU framework would be needed.
“Europe can be at the forefront of [blockchain’s] development”, Commissioner for Digital Economy and Society Mariya Gabriel told reporters in Brussels. “We have been funding blockchain projects since 2013. The total support will soon reach €100 million”, she said, citing My Health My Data, a digital health information project to encourage patients to share their data securely.
Currently, the EU has several research programs that are engaged in the development of blockchain technologies, including Framework Programme 7 and Horizon 2020. Although Gabriel noted there are not enough developers in the region working on blockchain at the moment, the commission said it could provide up to €340 million in funding for projects drawing on blockchain technologies by 2020.
However, some have raised concerns that this would open the EU to issues such as fraud and money laundering, as well as financial problems. At a Brussels press conference, European Parliament lawmaker Jakob von Weizsacker warned of the risks incurred when one system dominates a technology. “Once you’re locked into one particular platform, that can imply enormous monopoly rents”, he said.
Authorities including the European Central Bank and the European Securities Markets Authority warned about the speculative environment for cryptocurrencies and ICOs, citing their potential for loss. EU Financial Services Commissioner Valdis Dombrovskis emphasized the need to exercise caution so that cryptocurrencies “do not become tokens of unlawful behaviour or the object of empty speculative bubbles”.
“There are already more than 1,500 virtual currencies and new ones appear every day,” said Markus Ferber, a member of the European Parliament. “Nevertheless, from a regulatory point of view they are still the wild west. That’s why Bitcoin and co. need to be classified as financial instruments. On that, the commission has to deliver”.