EBA Report means more room for startups

Onlookers at the European Banking Authority’s report on digital currency got a bit scared: “What is all of this about banks not being allowed to touch bitcoin?”.

In my opinion the report is sensible and considered if you remember the scope of the European Banking Authority (EBA). The EBA’s explicit role is to “safeguard […] the orderly functioning of the banking sector”. It’s focus is banking, as one part of the general financial services industry. So ‘yes’ it did recommend that banks, payment/ e-money institutions should be discouraged from “buying, holding or selling” digital currency, but so what? One of the greatest attributes of digital currency is the innovation drive in this ecosystem. Taking the banks out of the equation allows that ecosystem to thrive further without stiff competition from the incumbents. Separately, bitcoin dropped 40% last week; that is a quite a volatile asset for a bank to hold (not to say that they don’t hold risky assets). Also, let’s remember that the biggest problem facing digital currency startups is being able to open a bank account for their business; to that, the EBA stated that this should not prevent a bank from opening a current account for “businesses active in the field” of digital currencies.