New report warns EU decision-makers from banning Bitcoin !
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Virtual currencies and central banks monetary policy : challenges ahead
An analysis of one of the new cryptocurrency reports issued by the European Parliament's Economic and Monetary Affairs Committee warns legislators against ignoring or even trying to block cryptocurrency
Cryptocurrency A contemporary form of private money
This report, submitted by the First Policy Department at the request of the Committee on Economic and Monetary Affairs of the European Parliament, bears the title of digital currencies and central banks of monetary policy: future challenges. In it, authors Marek Dabrowski and Lucas Jankosi of the Center for Social and Economic Research called for digital or virtual currency to be seen as a "contemporary form of private money".
Referring to the term "private money" in the not-too-distant past, the researchers acknowledge that the technological characteristics of digital currencies, such as Bitcoin, make transactions "relatively safe, fast and transparent", but it is recognized that the characteristics of confidentiality and cross-border trading represent Challenging financial regulators. Where the report said:
"Unlike the last eighteenth and nineteenth centuries, digital currencies are used worldwide, striking national borders"
Digital currencies will remain for a while
Digital currencies are not expected to disappear anytime soon, especially because of their non-political and decentralized characteristics. What's more, authors urge economists not to underestimate the disruptive potential of this new technology. Where he stated in the report:
"The economists who attempt to dismiss the justifications for and importance of Digital currencies, considering them as the inventions of “quacks and cranks” (Skidelsky, 2018), a new incarnation of monetary utopia or mania (Shiller, 2018), fraud, or simply as a convenient instrument for money laundering, are mistaken. Digital currencies respond to real market demand and, most likely, will remain with us for a while.
Policy makers and regulators should not ignore Digital currencies, nor should they attempt to ban them. Both extreme approaches are incorrect. Digital currencies should be treated by regulators as any other financial instrument, proportionally to their market importance, complexity, and associated risks. Given their global, trans-border character, it is recommended to harmonise such regulations across jurisdictions. Investment in Digital currencies should be taxed similarly to investment in other financial assets ."
The authors recognize that, given the "transnational nature" of digital currency companies, any attempts at a ban would lead to failure. Instead, they recommend taxes on these currencies similar to other financial assets and "harmonization" regulations across jurisdictions - a theme discussed at the recent G-20 summit. Last week, the European Union adopted a new anti-money laundering (AML) directive specifically targeting digital currencies in an effort to track associated services, and not to blind users.
Does Bitcoin compete with the national currency?
Earlier this year, Bitcoinist reported that the co-founder of the Bitcoin Foundation, John Matonis, said about the spin-off that it might end the real cash currencies created by the central bank. The World Gold Council also said that Bitcoin has the ability to "undermine central banks."
The latest report has highlighted the possibility that Bitcoin poses a strong threat to central banks, but the authors eventually conclude that this is unlikely to happen. Referring to the current disproportionate differences between capital and the use of sovereign currencies and currencies, the report predicts that "monetary dominance" will be the main central bank and the major currencies will remain undisputed in the near future.
In the end, one can not rule out this future progress in information technology, which can be more transparent and secure. This may increase the chances for digital currencies to compete effectively with sovereign currencies, including major currencies.
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