The European Investment Bank (EIB) has published a policy paper exploring the disruption caused by FinTechs and blockchain technology, with a focus on cryptocurrencies. The paper argues that, while the rapid expansion in Blockchain has led to considerable potential benefits, it has so far left unaddressed the risks that the technology could imply. Such risks include AML/CFT, consumer protection, tax evasion, and the regulation of capital movements. The key challenge is that the technological expansion has outpaced the actual regulatory measures taken. The paper concludes that more regulation and cross-country coordination is therefore needed.
The paper also suggests potential applications of blockchain technology for international financial institutions (IFIs) and their clients. The technology has several applications that could facilitate the working of an IFI, with Blockchain securities being the most pertinent one given IFIs’ issuance volumes.