The E.U. Proposes To Ban Geo-Blocking Of Digital Currency Transactions
On February 10, 2017, the European Union Committee on Internal Market and Consumer Protection authored a proposal that focuses on protecting the economic interests of consumers and coordinating the free movement of goods within Europe’s internal market.
The 38-page document targets “geo-blocking,” a protection measure where access to internet content is restricted based on a user’s geographical location. Some lawmakers see geo-blocking as a form of discrimination, as well as one of the last obstacles for Europe to obtain a cohesive digital common market, also known as the Digital Single Market (DSM).
The proposal states, “The personal data created by the e-commerce transactions should be stored in data centres in the Union, regardless of the location that the seat of the payment company is incorporated.”
An amendment in the proposal states:
“[T]he Commission should assess whether to provide the legal framework that allows, subject to the freedom of contract principle, the protection of undertakings and consumers when the transaction is carried through alternative modes of payment, including virtual currencies, other blockchain type transactions and e-wallets.”
It is worth noting that the European Commission (EC) has identified the completion of the DSM as one its 10 political priorities. According to the EC:
“The DSM can create opportunities for new startups and allow existing companies in a market of over 500 mln people. Completing a Digital Single Market could contribute € 415 billion per year to Europe’s economy, create jobs and transform out public services.”
The EC further states that an inclusive DSM enhances the use of digital technologies and can improve citizens’ access to information and culture. It is the EC’s belief that through this strategy, job opportunities can improve while also promoting a modern and open government.
The proposal goes on to state that geo-blocking has become an issue caused in part by businesses refusing to deal with customers from areas with high levels of cybercrime. Many argue that this unjustly prevents innocent people living in, or with IP addresses in, those areas to have less access to EU goods, services, and their peers.
Furthermore, the committee urges the EC to consider a legal framework for protecting consumers when transactions involve virtual currencies and other blockchain-based transactions.
Although this EU proposal regulates digital currencies, it is not the first. In July 2016, the executive branch of the EU adopted a proposal to combat terrorist activities by making it more difficult to launder money through the use of virtual currency exchanges and wallet providers.
The European Parliament also released a report in January 2017, entitled “The Juncker Commission’s ten priorities: State of play at the start of 2017.” ‘Priority 7’ of the report suggests imposing stricter rules on the use of digital currencies so as to increase identity checks of users with reported suspicious transactions and financial activity.
In the United States, geo-blocking allows digital-currency-related businesses to block customers living in New York, for fear of violating ‘BitLicense’ legislation enacted by the New York Department of Financial Services (NYFDS). It is for this reason that online gambling sites commonly block US-based IP addresses.