ESMA Makes Call for Evidence on Virtual Currency Investments

The European Securities and Markets Authority (ESMA) has issued a Call for Evidence in the area of virtual currency as it applies to investments.

ESMA is an EU financial regulatory institution whose stated mission is to protect investors and enhance the functioning of the financial markets through the creation of a single rule book.

ESMA says it has been studying virtual currencies for six months in order to understand developments in the market and how they can impact investors, with the eventual goal of supporting the functioning of the EU single market.

The Call for Evidence was introduced through a 19-page paper summarizing its understanding in three specific areas of interest:

1. Investment products such as collective investment schemes, derivatives or contracts for difference (CFD's) where virtual currency is the underlying asset.

2. Assets/securities that are traded using virtual currency ledgers.

3. The use of distributed ledger technology for the transfer of non-virtual currency-related securities.

The paper requests of its readers to submit additional information that will help ESMA in its undertaking. Submissions are being accepted through its website until July 21, 2015.

The paper touches upon a variety of issues in the above areas. It recognizes the advantages of such systems, such as savings in time and cost, while also acknowledging risks such as irreversibility, Volatility and non-enforceability.

Also of note is its attention to the NXT cryptocurrency, which it discusses on multiple occasions vis-à-vis differences with Bitcoin and the assets traded on it.