European Parliament says regulators should not attempt to ban virtual currencies
In a report published today the European Parliament said that the naysayers who dismiss virtual currencies as the invention of “quacks and cranks” are mistaken and that digital currencies are responding to “real market demand and, most likely, will remain with us a while”.
The authors of the report commissioned by the Economic and Monetary Affairs Committee also suggested that economists who were not only dismissive of the legitimacy of virtual currencies but also thought of them “as a new incarnation of monetary utopia or mania, fraud, or simply as a convenient instrument for money laundering” were also misguided.
Buttressing their argument of the worthiness of alternate private money, the authors Marek Dabrowski and Lukasz Janikowski, pointed to the pervasiveness of blockchain technology that makes virtual currency transaction networks relatively safe, transparent, fast and global.
Cryptocurrencies – a drop in the currency sea
The greatest challenge that central banks face regarding the use of cryptocurrencies, however, is their disregard for borders said Dabrowski and Janikowski, who recommended a middle road for policy makers when grappling with their increasing use and how to regulate them.
They suggested rather than ignore or ban cryptocurrencies, central banks should treat them as they would any other financial instrument and regulators, given the global trans-border characteristics of digital currencies, should harmonise regulations across jurisdictions.
The report also proposed that investment in virtual currencies were taxed in the same manner as other financial instruments.
While the report was broadly positive about digital assets, the authors put the sector into perspective, saying that despite the relative market success it was not a phenomenon that was likely to challenge the supremacy of major sovereign currencies. The authors highlighted that, even after a decade of Bitcoin and its cryptocurrency rivals, “its role remains marginal”.
Even after a strong weekend rally, the total market capitalisation of all cryptocurrencies remained below $300bn on Monday, while broad money in the US approached $14 trillion at the end of 2017.
But the report’s authors still saw a bright future: not only did virtual currencies remain a viable alternative for payments in countries where trust in their own sovereign currencies was eroded due to instability, but the progress of information technology was unstoppable and could make virtual currencies a serious contender to all sovereign currencies in the years to come.