Can European Parliament replace fiat currency with cryptocurrency?
The European Parliament has recently released a new analysis focusing on replacing fiat currency with cryptocurrency in certain cases. The European Parliament Committee on Economic and Monetary Affairs has come up with this new proposal to expand the functionality of cryptocurrency in the European market.
The European Parliament has thoroughly researched on the prospects of cryptocurrencies and how they function in the crypto market space. The review also sheds light on the impact the crypto domain on the overall economic system of the world.
The statements by European Parliament
The European Parliament has elucidated its opinion on using cryptocurrency as a substitute to money. It has stated, “Digital currencies, also known as ‘virtual currencies’ or ‘cryptocurrencies’ can be defined as ‘a digital representation of value, not issued by a central bank, credit institution or e-money institution, which in some circumstances can be used as an alternative to money.”
The Parliament has further stated its view saying, “Their value is determined by the law of supply and demand, relying on potential exchanges for other goods or sovereign currencies, and it is not backed by any monetary authority (decentralised character). The supply (creation of new units) is often managed by computer algorithms, which help to create scarcity to maintain value.”
It is also explained, “The common feature of the various digital currencies is the use of DLTs to manage value exchanges. Digital currencies management encompasses services such as cryptocurrency payments, cryptocurrency wallets, exchange and trading solutions for cryptocurrencies (cryptocurrency brokerage) and mining.”
On the subject matter of digital currencies possessing dual nature of being innovative and disruptive, simultaneously, the Parliament stated,“Other innovations with a relevant impact in the financial sector are the new cryptocurrencies, like Bitcoin, which are digital currencies that operate in a decentralised way by means of P2P technologies, like blockchain, and without participation or supervision by any central bank or institution. These cryptocurrencies offer technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.
All these disruptive and innovative applications utilise new and emerging technologies, among which those stand out are AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of things (IoT), augmented reality, etc.”
The Parliament has also stated that the Central Banks in the upcoming future may have their own cryptocurrencies. According to a statement,“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the inter-cryptocurrency market, broadening the number of competitors. A potential inadequacy of traditional competition policy to address competition issues in the cryptocurrency markets can be found, suggesting direct public participation through a central-bank digital currency as a remedy.”
However, the review has explicitly pointed out that cryptocurrency does seem to be a challenge for the regulators. It is stated, “The international nature of cryptocurrency markets is also a challenge to competition policy at the European level. Many of the players operate from global locations outside the jurisdiction of European competition authorities, which makes investigation or prosecution on anticompetitive behaviours more difficult. Europe leads, at international level, the supply of wallet and exchange services, with 42% and 37% in terms of number of players.”
According to the statement made by the European Parliament, “It is also the principal actor in payments (33%). Nevertheless, the main weakness of Europe is the concentration of the mining activity on non-European countries (Europe only capture just 13% of the current mining market). Mining is the most strategic, sophisticated and technology dependent activity in the cryptocurrency market, and there currently appears to be a significant concentration of mining activities occurring in certain Chinese provinces.”
However, earlier on Friday, publication of a research study has been conducted by the Parliament. The primary focus of this research work has been on the competition prevalent in the domain of fintech.
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