A European Parliament representative has proposed a budget amendment to spend €1 million to create a task force aimed at studying blockchain and distributed ledger technologies.

In May, the European Parliament gave a nod for 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 MEP Jakob von Weizsäcker in a report that began making rounds earlier this year.

The MEP is now proposing 1 million euros to be spent on the task force that is essential to build up sufficient regulatory capacities based on technical excellence.

“This pilot project aims at creating a Task Force, staffed with regulatory and technical experts, in order to build up technical expertise, regulators capacity and develop use cases, especially for governmental applications, in the field of distributed ledger technology (DLT) as proposed in the Resolution of the European Parliament on virtual currencies”, he said.

Emphasizing on the need for this investment, he reasons that regulators and legislators lack the technical expertise and capacity to fully understand the technology and its potential. To that end, von Weizsäcker said that while implementing stringent regulations too early would stifle innovation, a wait-and-watch approach might lead to materialization of systemic risks.

“A Task Force specifically dedicated horizontally to monitor DLT and its applications could provide the expertise necessary properly to counter risks without stifling innovation by means of premature regulatory intervention”, he said.

He noted that although the use of blockchain technology and its applications are limited in size currently, it might change soon driven by significant investments and network effects. He said that the task force should aim at identifying standards for best practice and developing stress tests for applications that are set to become systemic as well as developing use cases for the application of the technology.