EBA’s Opinion on Proposal to Regulate Virtual Currency Exchanges/Wallets


The EBA have reviewed the EU Commission’s proposal to regulate VC exchanges and wallets and have provided their Opinion on the matter.

They have interpreted the Commission’s proposal as requiring VC exchanges/wallets to register in every state in the EU where they do business. See more on this seismic issue in this post.

Further, the EBA wants to vie for control over the design of the guidelines that should apply to VC exchanges/wallets: there are a lot of unanswered questions relating to how the 4th Anti-Money Laundering Directive (4AMLD) will apply to VC exchanges and the EBA wants to set-out the framework and detail on how 4AMLD should apply.

The EBA is particularly concerned that, with the application of 4AMLD to VC Exchanges/Wallets, those businesses may misrepresent themselves as being regulated for consumer protection or prudential (protection of customer funds) purposes. The EBA states that VC Exchanges/Wallets may “[imply] that respective regulatory safeguards are in place that actually are not“.

As such, the EBA implores co-legislators to consider how misperception and misrepresentation to the consumer can be avoided.

Re-enforcing a ban
In this regard, the EBA re-iterates its previous position that a “legal entity that carries out regulated activities not to be allowed also to carry out VC transactions“. This was one of the key warnings raised by the EBA in their initial report into VC. The EBA goes on to state that current VC Exchanges who are regulated under payment services misrepresent themselves as being authorised and/or regulated for VC transactions.

With this imposition of a restriction of regulated entities from carrying out VC transactions, it would mean that VC Exchanges and Wallets will need to take a completely different approach. That approach could be, in principle, to segregate the fiat from the VC activities into two separate corporate vehicles.