The EU on cryptocurrencies: The European Parliament has just published an in-depth analysis of virtual currencies.
EU on Cryptocurrencies
The EU parliament urged regulators and policymakers in a 33-page document not to attempt to ban cryptocurrencies. They also stressed that these countries can’t simply ignore cryptocurrencies either.
The report states:
“Policy makers and regulators should not ignore VCs, nor should they attempt to ban them. Both extreme approaches are incorrect.”
Virtual Currencies and Central Banks Monetary Policy: Changes Ahead
Policy Department A provided the document at the request of the Economic and Monetary Affairs Committee. It was co-authored by Lukasz Janikowski and Marek Dabrowski. The report states that the majority of virtual currencies (VCs) are often referred to as cryptocurrencies due to most VCs use of cryptographic algorithms.
This paper defines VCs as private digital money that is decentralized and based on blockchain technology. “VCs 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 harmonize such regulations across jurisdictions,” the author states.
In addition to this, the authors recommend that cryptocurrencies should be taxed similarly to investment in other financial assets.
Death of Traditional Financial Systems?
The report then dives into the effect that cryptocurrencies could have on current financial systems. Many within the cryptocurrency space see digital currencies as a major threat to banks, but the authors of the report don’t seem to think so.
Both Janikowski and Dabrowski have concluded that despite Bitcoin’s popularity, it is unlikely that it can compete with the sovereign currencies currently used by central banks. Both authors cite that the total market cap of all cryptocurrencies in April was below $300 billion, while broad money (M3) within the US reached $14 trillion USD at the end of 2017.
The authors don’t see VCs as a threat to the central banks, and thus the EU feels it’s unnecessary to ban the use of cryptocurrencies.
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