Doubtful about Crypto replacing Fiat : German Finance Minister
Olaf Scholz, finance minister of Germany, is unsure about the prospects of cryptocurrencies replacing traditional fiat currencies, as reported by the German edition of Cointelegraph on Tuesday.
Scholz made the statement at a recently held “citizen’s dialogue” at the German-Dutch Army Corps in the city of Münster. He compared the recent fervor caused by cryptocurrencies with the Tulip mania, a financial bubble that happened in the Netherlands during the 17th century, by stating, “and the danger is great that there will be such a tulip inflation.” The Tulip mania is widely known as one of the first speculative bubbles which saw the prices of a certain kind of tulip bulb rise exponentially, and then dramatically fall.
He also pointed out that immense technological infrastructure will be required to initiate and sustain large-scale crypto-use. With the requirement of a powerful computer backed by energy-intensive technology, cryptocurrencies cannot maintain the drive to overtake fiat currencies.
Scholz also highlighted the increased use of cryptocurrencies in illicit activities and urged regulators to keep a close eye on digital currencies used in activities such as money laundering, terrorist financing, and others that will benefit from a decentralized network of transferring funds. He further added, “…we do not believe that they already have an economically significant importance today.”
The official German stance on cryptocurrencies will directly affect their use and regulations, not only within the country but also in the European Union (EU), which Germany and France are looking to lead. The legislators of the trade bloc have been speculating over the past few months on the necessary guidelines that need to be imposed on the cryptocurrency industry.
Belgium think-tank Bruegel presented a report on September 8 to European finance ministers that spelled out regulations on crypto-exchanges and initial coin offerings (ICOs). A key finding from the report placed importance on the “scope for regulatory arbitrage,” referencing the migration of Binance from Asia to Europe. The European ministers described ICOs as “very interesting and promising vehicle instruments”, particularly for raising funds and hence, required supervision.
During the recently held meeting of the Economic and Financial Affairs Council in Vienna, Valdis Dombrovsksis, vice president of the European Commission, said that cryptos need more government regulation, not less. He said that the EU should emphasize crypto-classification and regulate them, noting that crypto is “here to stay.”
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