On July 9, a “Monetary Dialogue” session was held by the Committee on Economic and Monetary Affairs Committee (ECON) of the European Parliament. It’s a quarterly conference that is directly interlinked with the European Central Bank (ECB): Every three months, the president of the ECB (or, occasionally, another representative) appears before the Committee to report on the state of monetary policy in the union.
It is worth noting that the ECB has a complex relationship with cryptocurrencies, with its president declaring last year that it wasn’t “in their powers to prohibit and regulate them.” However, more recently, the ECB has engaged with the topic, claiming banks should “segregate” their dealings in cryptocurrencies from other activities, and has been championing the positive effects of blockchain.
For the first time in the history of the Monetary Dialogue sessions — which were established in 2012 — virtual currencies were discussed in a separate topic. Thus, in a panel called “Virtual Currencies and Central Banks Monetary Policy: Challenges Ahead,” five different briefing papers were submitted and discussed.
Here’s what those reports argued, and how their content might influence the ECB and its stance toward cryptocurrencies. It is worth noting that the opinions expressed in the following documents do not necessarily represent the official position of the European Parliament (EP), although they were submitted at its request.
CASE report: Virtual currencies will remain with us in the future, should be regulated, but not banned
The report dubbed “Virtual Currencies And Central Banks Monetary Policy: Challenges Ahead“ was presented by Marek Dabrowski and Lukasz Janikowski of the Center for Social and Economic Research (CASE) — an independent, nonprofit economic and public policy research institution based in Warsaw, Poland.
Essentially, the authors argued that virtual currencies — meaning Bitcoin and altcoins in particular — is a form of private money that enjoys its technological benefits that allow for cheap and swift transactions across the globe: “Unlike their 18th and 19th century paper predecessors, VCs are used globally, disregarding national borders.” However, the report argues that VCs are not widely acceptable.
Thus, the paper outlines a neutral overview of cryptocurrencies with their usual pros and cons that are commonly discussed in mainstream media, and then proceeds with their conclusion. Notably, the authors argue that VCs should neither be ignored nor banned by regulators:
“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. Investment in VCs should be taxed similarly to investment in other financial assets.”
Further, they declare that in the short term, VCs won’t be able to challenge sovereign currencies issued by central banks, as their role remains “marginal,” despite some relative success on the market. Nevertheless, cryptocurrencies have more potential in less economically stable countries, according to the report, which cites Venezuela’s Petro as a prime example:
Such countries already struggle with the phenomenon of currency substitution in the form of spontaneous dollarization or euroization. VCs may offer another avenue for currency substitution, as observed recently in Venezuela.
Finally, the report concludes that further technological advances might allow VCs to compete with conventional forms of money in the future. The authors clearly recognize the potential of cryptocurrencies, stating:
“The economists who attempt to dismiss the justifications for and importance of VCs, considering them as the inventions of ‘quacks and cranks,’ a new incarnation of monetary utopia or mania, fraud, or simply as a convenient instrument for money…
See more at: https://cointelegraph.com/news/harmless-for-now-dangerous-in-the-future-here-s-what-eu-researchers-think-of-cryptocurrencies