With the prevailing issues within the fintech industry, a research has been tasked recently with the European Parliament Committee on Economic and Monetary Affairs.
The study suggested the fact that the central bank-issued digital currencies be the ‘remedy’ for the absence of competition regulation in the crypto industry.
It added the allowed cryptocurrencies promoted by banks, especially central banks, will transform the on-going playing field during the crypto market by boosting the number of competitors.
The study cited digital currencies for example Bitcoin as necessary paradigms which will contribute to the disruption belonging to the whole sector, including monetary policy and financial stability.
Other new applying innovative developments involve “AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of products (IoT), augmented reality.”
Private cryptocurrencies are separate from central bank-issued digital currencies (CBDC). The CBDCs are derived from a “conventional bilateral settlement having a trusted central party.”
The study noted that while closed cryptocurrency systems here is a supervisory role, central banks should consider the “permissioned cryptocurrency” ways to integrate or customize the existing currencies.
The study claimed that CBDCs will be required to reshape the prevailing playing field from the inter-cryptocurrency market if you get the number of competitors.
It noted lacking traditional competition policy to answer the competition issues through the cryptocurrency industry is seen. The learning also suggested direct public participation getting a central-bank digital currency is the remedy.
As regards your competitors issues, case study noted, this is certainly classified into “inter-cryptocurrency market” competition may be between cryptos and “intra-cryptocurrency” market competition as found among carriers such as wallets and exchanges.
Regarding “inter-crypto market” competition, your analysis cited the “network effects” as well as an increasing number of users are really a barrier for other cryptos to key in the market. The learning forecast this scenario can lead to potential collusive agreements between men and women in hypothetical cartels.
In relations to “intra-crypto market” competition, wallets, exchanges, and payment providers should follow systems to hold the investors away from the market, including getting inducements from miners that prioritize one cryptocurrency against another.
In mid-July, a brand new EU directive continues to be passed providing stricter transparency measures for cryptocurrencies to halt money laundering and terrorist financing.