The most widely known cryptos are bitcoin and ethereum. There are significant risks involved in investing in cryptos. Their value can fluctuate wildly, and it is not always clear which parties are behind these currencies when it comes to issuing and managing them. If a party goes bankrupt, there is no guarantee scheme in place to protect consumers and businesses holding them. Central banks only support their own currencies. The euro, for example, is backed by the ECB, while the Federal Reserve System is responsible for the US dollar. There is no one behind bitcoin and other cryptocurrencies, however. For this reason, we feel it is prudent to warn consumers and enterprises about the risks involved in investing in cryptos. Legally speaking, it is not within our mandate to impose a ban, however.
Stable coins such as tether and libra are new to the crypto marketplace. Tether has already been launched, while Facebook's libra is still under development. Stable coins are backed by a mix of assets, such as dollars, euros and government bonds. This kind of backing makes their value less prone to fluctuations than bitcoin. At DNB, we see potential for these types of cryptocurrencies, because they enable cross-border payments that are quicker and cheaper compared to more traditional means. Moreover, they can be used on a large scale. At the same time, we see a wide range of risks: money laundering, tax evasion, privacy issues, competition and consumer protection.
Cryptos are susceptible to use in financial crime,including money laundering operations and terrorist financing. For this reason, the European Fifth Anti-Money Laundering Directive now also covers:
- platforms for exchanging cryptocurrencies into fiat money
- crypto wallet providers.
All of these parties are required to register their activities with DNB. We are responsible for monitoring compliance with anti-money-laundering legislation. However, registering with us does not imply that they are licensed by DNB. The do not fall under our full supervisory framework. By extension, they are not covered by a guarantee scheme.