EU Fintech Update: Virtual Currencies and Blockchain

Yesterday, the Irish Department of Finance published a Discussion Paper on Virtual Currencies and Blockchain Technology. The Paper was prepared following the Department’s research into virtual currencies and the blockchain ecosystem that exists in Ireland, Europe and globally.

The Paper provides a useful overview of the response of a selection of international jurisdictions to virtual currency regulation. It also sets out some interesting details on the "growing virtual currency ecosystem" in Ireland, noting that between 2012 and 2016:

• 6.3% of the total venture capital invested in Ireland was channelled to Irish-based blockchain businesses – a higher percentage than any other Northern European country for the period; and
• Irish-based blockchain businesses received approximately US$150m in venture funding – being second only (within the EU) to the UK for the period.

While the paper states that its purpose is "not to provide guidance or set forth policy in relation to virtual currencies trading, purchasing, selling or raising funds via Initial Coin Offerings", it also notes that there are a number of reasons why "an articulated position from the [Irish] Department of Finance on virtual currencies may be constructive". The reasons cited include the provision of clarity and transparency for consumers, investors and entrepreneurs, as well as the reduction of illicit activities, such as terrorist financing.  

The Department goes on to note that "no one policy measure or state agency [in Ireland] has the ability to address all the risks and opportunities that virtual currencies and distributed ledger technology now present". In light of that, the Department has proposed the creation of an intra-departmental Working Group that will draw on the expertise of multiple state agencies – including the Irish Department of Finance, the Revenue Commissioner, the Data Protection Commissioner and the Department of Business, Enterprise and Innovation - to explore and oversee developments in virtual currencies and blockchain. The Working Group's stated mandate will include "monitoring developments" at EU and global level in relation to virtual currencies and blockchain, identifying economic opportunities for Ireland in this area, and "considering whether suitable policy recommendations" are required.

The tone of the Paper is not dissimilar from the approach adopted recently at EU-level by the European Commission in its Fintech Action Plan 2018, in which the Commission committed to "monitoring the developments of cryptoassets and Initial Coin Offerings" together with EU regulators and other international standard setters, with a view to "assessing whether regulatory action at EU level is required." The Commission has also recently established an EU Blockchain Observatory and Forum, which will report on the challenges and opportunities of cryptoassets later in 2018 and is working on a comprehensive EU strategy on distributed ledger technology and blockchain.

The establishment of the inter-departmental Working Group in Ireland is a welcome development for the country's growing virtual currency and blockchain ecosystem.

You can find out more about Ireland's blockchain ecosystem here and you read the full discussion Paper here.

For more information contact Gina Conheady, Head of A&L Goodbody's San Francisco Office.

Date Published:  23 March 2018