The European Union should hold off for now from regulating blockchain,
the technology that underpins the virtual currency
Bitcoin, EU lawmakers
are set to agree on Tuesday in the latest example of a softly-softly
approach by authorities.
"We don't want pre-emptive regulation, but we
do want precautionary monitoring," Jakob von Weizsaecker, a German
centre-left member of the European Parliament, told Reuters.
He
was speaking ahead of a vote on Tuesday in the parliament's economic
affairs committee on his report on virtual currencies and blockchain,
also known as distributed ledger technology.
It is the latest sign
of caution among regulators and lawmakers keen not to stifle innovation
and risk losing out in a global race to exploit such financial
technology, or fintech.
Blockchain's proponents say it will "disrupt" finance by slashing the cost of payment transactions and settling stock trades.
"One
reason why regulating now in detail would be difficult is that we don't
know yet what the most important use of blockchain might be," von
Weizsaecker said.
His report is non-binding but it will help shape
likely draft EU legislation later on. It asks the European Commission
to set up a task force to monitor blockchain.
Christopher
Giancarlo, a member of the US Commodity Futures Trading Commission, said
last month that regulators should "do no harm" and allow blockchain to
flourish.
Britain's Financial Conduct Authority will allow testing
of fintech innovations on consumers from May in a controlled
environment, or "sandbox", before considering new rules.
But
Swift, the global electronic messaging system used by 11,000 banks, said
this month that blockchain was not mature enough to fulfil the
requirements of the financial community, though others see it as only a
matter of time.
"Some of the technology considered new-fangled,
untested or unproven today, including distributed ledger technology,
will become mainstream within the next ten years," Wall Street veteran
and head of a blockchain start-up, Blythe Masters, said last week in
London.
Uncertainty over regulation was hindering the development of blockchain, Masters added.
Vincent
Mercer, a consultant at Charles Russell Speechlys, said there was a
significant risk that regulators will upset blockchain's potential by
regulating too fast and without coordination.
The European Central
Bank said on Monday it was experimenting with blockchain, and the Bank
of England is also looking at what it means for updating its own
payments system.
Andrew Hauser, BoE executive director for payments, said last week the authorities had to keep abreast of blockchain.
"Central banks can't afford to be Ubered," Hauser joked, referring to the ride-hailing app shaking up the taxi sector.
© Thomson Reuters 2016
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