The lack of agreement among EU officials on how to treat virtual currencies has created a legal limbo in Europe, where people, organisations, and business can interact with cryptocurrencies without a clear legal framework.

However, the plans recently unveil by the social media giant Facebook to launch their own virtual currency Libra among millions of European users have triggered a debate in the EU about virtual currency legislation.

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During a meeting of EU finance ministers held in Helsinki on Friday (13 September), France's minister Bruno Le Maire warned that Libra could cause a risk to consumers, financial stability and even "the sovereignty of European states".

The previous day, Le Maire urged the EU institutions to introduce a framework for the regulation of virtual currencies, speaking at a conference of the Organisation for Economic Cooperation and Development (OECD).

'Not on European soil'

"I want to be absolutely clear: In these conditions, we cannot authorise the development of Libra on European soil," Le Maire said, adding that "this eventual privatisation of money contains risks of abuse of dominant position".

However, according to the European Banking Authority (EBA) "too little is known about the Libra token and the envisaged services" to yet draw conclusions.

"With the publicly available information on Libra, it is currently not possible to say which exact EU rules would apply [to Libra]," the EU commission told Reuters.

In 2018, the European Supervisory Authorities for securities (ESMA), banking (EBA), and insurance and pensions (EIOPA) warned the general public about cryptocurrencies saying they are "highly-risky and unregulated products and are unsuitable as investment, savings or retirement planning products."

In June, Facebook announced the details of its virtual currency Libra and financial infrastructure, which is designed with blockchain technology to allow people to buy things or send money to other people with nearly zero fees.

"Since our vision for the Libra project was announced three months ago, we have maintained our commitment that technology-powered financial services innovation and strong regulatory compliance and oversight are not in competition," said Libra Association's head of policy and communications Dante Disparte on Wednesday.

The Libra Association has submitted a request to the Swiss Financial Market Supervisory Authority (FINMA) to "clarify the regulatory status of the Libra Association and the Libra coin".

"We recognise that blockchain is an emerging technology, and that policymakers must carefully consider how its applications fit into their financial system policies," said Disparte.

In August, the Libra Association was reported to be subject to an EU commission's investigation for potentially anti-competitive behaviour.

However, it is unclear when the results of this investigation will be public.

The Libra Association includes tech companies such as PayPal, Ebay, Spotify, Uber or Lyft, as well as financial firms such as Visa and Mastercard.

EU first to regulate?

In most of the world, cryptocurrencies are still totally unregulated.

Based on an analysis released by the EBA in January 2019, since there are thousands of different cryptocurrencies "it is necessary to consider the nature of a crypto-asset service on a case-by-case basis to determine if it falls within the scope of EU financial services law".

However, if virtual money falls inside the electronic money directive in Europe the company must "obtain authorisation in order to carry out regulated investment services," EBA added.

Examples of these investment services include the receipt, transmission, and execution of orders on behalf of clients, portfolio management and advice.

In 2006, the EU commission presented an updated electronic money directive to establish "a modern and harmonised legal framework for the issuance and redemption of e-money" - which member states implemented in 2011.

Although this directive has been recently complemented with the anti-money laundering directive, member states are obliging the EU to clarify the situation.