ECB urges EU to curb virtual money on fear of losing control
The headquarters of the European Central Bank (ECB) are illuminated with a giant euro sign at the start of the "Luminale, light and building" event in Frankfurt, Germany, March 12, 2016. REUTERS/Kai Pfaffenbach/File Photo
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By Francesco Canepa
FRANKFURT (Reuters) - The European Central Bank wants EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone.
The European Commission's draft rules, aimed at fighting terrorism, require currency exchange platforms to increase checks on the identities of people exchanging virtual currencies for real ones and report suspicious transactions.
In a legal opinion published on Tuesday, the ECB said EU institutions should not promote the use of digital currencies and should make clear they lack the legal status of currency or money.
"The reliance of economic actors on virtual currency units, if substantially increased in the future, could in principle affect the central banks’ control over the supply of money ... although under current practice this risk is limited," the ECB said in the opinion for the European Parliament and Council.
"Thus (EU legislative bodies) should not seek in this particular context to promote a wider use of virtual currencies."
The ECB argues the Commission's proposal does not go far enough as it does not cover the use of virtual money to buy goods and services.
"Such transactions would not be covered by any of the control measures provided for in the proposal and could provide a means of financing illegal activities."
(Reporting by Francesco Canepa; Editing by Tom Heneghan)
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