The European Parliament Committee of Economic and Monetary Affairs has written the new report in which they state that digital currencies (cryptocurrencies) can be defined as a digital representation of value, not issued by a central bank, credit institution or e-money institution, which can, in some cases, be used as an alternative to government-backed currencies.
Furthermore, the committee describes cryptocurrencies as the assets whose value is determined by the law of supply and demand, which are not backed by any monetary authority.
“Digital currencies management encompasses services such as cryptocurrency payments, cryptocurrency wallets, exchange and trading solutions for cryptocurrencies (cryptocurrency brokerage) and mining,” the report deduces.
The EU Realises the Disrupting Potential of Cryptocurrencies
According to the 136-pages long report, the committee realises that the disruption of the entire financial sector, including monetary policy and financial stability, can come directly from Bitcoin (BTC) as it operates in a decentralised way by means of P2P technologies, like blockchain, and without the support or surveillance by any central bank or established financial institution.
“All these disruptive and innovative applications utilise new and emerging technologies, among which those that stand out are AI, cloud computing, biometrics, digital identity, the blockchain, cybersecurity, RegTech, internet of things (IoT), and augmented reality,” the mentioned report explains.
“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,” states the committee while spotting some unaddressed competition issues in the cryptocurrency markets, which can be solved by the direct public participation through a Central-Bank Digital Currency (CBDC).
However, There are Still Many Concerns
“The international nature of the cryptocurrency market is also a challenge for the competition policy at the European level,” the report continues to dissect all the difficulties encountered by the lawmakers with the rise of the new technologies.
“Many of the players operate from global locations outside the jurisdiction of European competition authorities, which makes investigations or prosecutions on anticompetitive behaviours more difficult,” the committee emphasises.
They have also revealed that Europe spearheads the supply of wallet and exchange services, with 42% and 37% of the companies providing those kinds of services, while simultaneously being 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),” the paper reports, as it describes cryptocurrency mining as the most strategic, sophisticated and technology dependent activity in the cryptocurrency market.
It seems that the European Parliament is doing a thorough research on crypto, and possibly getting ready to devise a clear plan on how to deal with and regulate the newly emerged assets backed by the blockchain technology.
Undoubtedly, the sooner we have a clearly announced official stance, the sooner the companies will be able to fully dedicate themselves to the actual development instead of trembling over the possible legal repercussions.