EU Parliament Study: Central Bank Digital Currencies "Will Reshape Competition" In Crypto Market

Authored by Molly Jane Zuckerman via CoinTelegraph.com,

A study on issues of competition in fintech, commissioned by the European Parliament Committee on Economic and Monetary Affairs (ECON), was published July 20. It found that central bank-issued digital currencies could be a “remedy” for a lack of competition policy in the crypto sector:

“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”

The study mentions cryptocurrencies like Bitcoin (BTC) as “technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.” Other “disruptive and innovative applications” of new technologies include “AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of things (IoT), augmented reality.”

image courtesy of CoinTelegraph

Private digital currencies are defined separately from central bank-issued digital currencies (CBDC), noting that the CBDCs differ by being based on a “conventional bilateral settlement with a trusted central party.”

According to the study, since closed cryptocurrency systems require a supervisory authority, central banks could be considering using “permissioned cryptocurrency systems” to “complement or substitute” the currencies already used.

The study claims that CBDCs “will reshape the current competition level in the inter-cryptocurrency market” by adding to the pool 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.”

The competition issues, the ECON study notes, can be divided into “inter-cryptocurrency market” competition between cryptos, and “intra-cryptocurrency” market competition between service providers like wallets and exchanges.

In terms of “inter-crypto market” competition, the study reports that the “presence of network effects” and a high number of users of a cryptocurrency could provide a barrier to entry for other cryptos attempting to join the market. The study hypothesizes that this competition “may lead to potential collusive agreements between members of hypothetical cartels.”

For “intra-crypto market” competition, wallets, exchanges, and payment providers could create practices that would keep others out of the market, such as receiving inducements from miners that favor one cryptocurrency over another.

In mid-July, a new EU directive came into force that set stricter transparency rules for digital currencies to protect against money laundering and terrorist financing.

Also in July, virtual currencies were discussed for the first time at ECON’s “Monetary Dialogue” session, with five different briefing reports discussed on topics ranging from crypto and central banks to crypto and the “Eurosystem.”

Comments

The_merovingian pods Mon, 07/23/2018 - 07:36 Permalink

That’s just straight up cargo cult if they decide to create their own cryptocurrency.

The whole point of Bitcoin is that it is a permissionless, censorship resistant and immutable digital currency. The use of cryptography (crypto), P2P networks and a blockchain are just means to an end and not goals in of themselves.

Central banks already have digital currencies, in fact most of it is digital. The best they can hope to achieve is to replace Tether for USDT and EURT.

In reply to by pods

Yellow_Snow 44magnum Mon, 07/23/2018 - 06:52 Permalink

Why would people want to use a central bank crypto? 

Backed with an inconceivably massive debt load - to one that is debt-free and not manipulated...

A crypto issued by any government will be 'centralized' and will be corrupted in short order...  They might overtake fiat someday - but it will be plagued by the same problem of being manipulated by the central banks.

This is why it is so important to own 'decentralized' cryptocurrencies

In reply to by 44magnum

silverer Skateboarder Mon, 07/23/2018 - 06:49 Permalink

I'm beginning to think that Bitcoin was a government planned event all along. Out into the wild it went, and then, not surprisingly, people would be more accepting that the government "adopted" the idea. Maybe the government originated the idea, and this was the plan all along? If that was not the case, it sure seems like they have a plan now.

In reply to by Skateboarder

Bobbyrib Mon, 07/23/2018 - 05:35 Permalink

The bankers see another opportunity to scam our wealth from us. Luckily in the long run the ECB is unsustainable. All these worthless ECB bureaucrats will be unemployed until the bailed out private banking institutions hire them as promised.

gunzeon 44magnum Mon, 07/23/2018 - 08:21 Permalink

it's nice to rag it off but keep a few things in mind;

 - it is open source so irrespective of who created/conceived it and got it rolling it can be verified to be uncorruptable/unsubvertable ( whatever the right word(s) )

 - it works

 - naturally red sea walkers are first to smell a profit, what's new about that ?

In reply to by 44magnum

koan Mon, 07/23/2018 - 05:40 Permalink

Now we see the end game of cryptos, "permissioned" in other words digital fiat.
This was always the goal in my mind, Bitcoin was just a trick to condition people to digital money.

messystateofaffairs koan Mon, 07/23/2018 - 07:09 Permalink

Wrong. Bitcoin is a threat they have not figured out how to stop. They are trying to use our own weapon technology against us. Making lemonade out of the lemons they find themselves with, these people did not get where they are by being stupid. They are adapting freedom technology to improve slavemastering. It won't work, too many people are beginning to understand the difference between specie and fiat money, traceable and private. A new underground economy will emerge using untraceable peer to peer fixed quantity free market selected currencies.

In reply to by koan

tmosley koan Mon, 07/23/2018 - 08:09 Permalink

That's a stupid thing to say.

They introduce crypto fiat, removing the banking bottleneck to getting into real crypto, then it becomes a waiting game. As fiat currencies collapse, the people who own them will move into real cryptos AND THEY WON'T COME BACK.

Official cryptocurrencies will fuel the rise of distributed exchanges, which CAN'T be shut down. It will also FORCE banks to start offering much higher interest rates to attract deposits. They won't be needed for simple safe storage any more.

In reply to by koan

Brazen Heist II Mon, 07/23/2018 - 06:05 Permalink

Oh come on, as if you couldn't see this coming. I predicted central bank crypto years ago.

If they can't beat crypto, they will join it. And they will promote their own crypto, but it will be centralized. The decentralized coins will operate in parallel with their products, but theirs will unlikely be fully permissionless.

CHX13 Mon, 07/23/2018 - 06:24 Permalink

And THAT is the problem with cryptos. They can just be created newly out of thin air, just like fiat. And THAT's why *THEY* are on constant WAR with real money. Keep stacking and GLTA. EOM.