European ministers are discussing a new crackdown on cryptocurrency exchanges and initial coin offerings to protect investors.
A white paper outlining the problem and possible solutions is before the ministers at a summit in Vienna this weekend.
A think-tank recommends that all 28-member states should adopt a European Union wide rule book for licensing exchanges and policing ICOs.
The EU has generally ignored regulating cryptocurrency so far, with central banks and ministers regarding the market as too small to inflict economic damage on the bloc.
The most popular cryptocurrency in the EU is Bitcoin, which has a low trading volume in the Eurozone.
But the market has grown by around a third in 2018, which has triggered closer scrutiny from lawmakers in Europe.
Potential risks of crypto assets
Interest is also kindled by the expected move of one of the world’s largest cryptocurrency exchanges from China to Malta. Binance is suffering from tighter regulation put in place by Beijing and wants to switch to a ‘friendlier’ tax and business environment.
The EU ministers are pondering if European cryptocurrency rules need modifying to address ‘potential risks exposed by crypto assets’, says the report.
The conclusions look at new rules for exchanges, mining farms and ICOs rather than regulating cryptocurrencies directly.
The introduction of updated money-laundering regulations across Europe mean a tougher environment for exchanges, who must prove client identity and report suspect transactions to the authorities.
But these rules may take a year or two to fully implement. Regulating exchange platforms is left to national agencies.
More likely are stricter guidelines for ICOs, which largely operate unfettered by investment regulations.
Scam crypto exchange warning
Meanwhile, investment regulators in Belgium have listed 28 platforms accused of running fraudulent cryptocurrency schemes and warns many more may be scammers.
“Despite earlier warnings, new complaints from consumers who have invested through cryptocurrency platforms are continuing,” said a statement from regulator the FSMA.
“Many have been identified as showing signs of fraud.”
The FSMA says many platforms are exploiting hype around cryptocurrency with fake projects that can raise huge profits – and then they disappear with the cash leaving the investor out-of-pocket.