The European Parliament on Thursday gave a nod to the setting up of a taskforce to monitor virtual currencies, like Bitcoin, to prevent their use for money laundering and terrorism financing purposes.

The proposal was put forward by Jackob Von Weizsäcker (S&D) in a report that began making rounds earlier this year. Among other things, the report recommended the setting up of a taskforce, overseen by the European Commission, to regulate virtual currencies and proposing recommendations for any necessary legislation to regulate the sector.

"To avoid stifling innovation, we favour precautionary monitoring rather than pre-emptive regulation. But IT innovations can spread very rapidly and become systemic. That's why we call on the Commission to establish a taskforce to actively monitor how the technology evolves and to make timely proposals for specific regulation if, and when, the need arises", said Mr von Weizsäcker.

The Parliament passed the proposal by 542 votes to 51, with 11 abstentions. It will now be forwarded to the Commission for consideration.

The Commission is currently considering proposals to bring virtual currency exchange platforms within the scope of the existing EU Anti-Money Laundering (AML) Directive, which is due for an update. These proposals include a measure which would require the platforms to undertake due diligence when customers exchange virtual currencies for real ones. The move seeks to end the anonymity associated with such exchanges. Regulators worry that the current system is helping money laundering and terrorist organisations.

The announcement follows a flagship roundtable series in the European Parliament, organized by EDCAB, that discussed the potential of digital currency and blockchain technology as well as the need for appropriate regulation in this sector.