EU in its latest report points out that if central banks and banks enter into the crypto market with their own cryptocurrencies, they can leverage their market power in the traditional financial market to limit the competition and affect Bitcoin and other cryptocurrencies’ future.
Central bank digital currencies can reshape competition
Bitcoin awareness and adoption is certainly on the rise but it is yet to achieve mainstream adoption. The world’s largest cryptocurrency, according to FSB report is not a risk to the stability of the global financial system.
Now, as per the latest report titled “Competition issues in the Area of Financial Technology (FinTech)” of European Union (EU) warns that central banks of the world can potentially affect bitcoin among other cryptocurrencies.
The report is commissioned by the European Parliament Committee on Economic and Monetary Affairs (Econ), that oversees the decisions made by the European Central Bank (ECB). Reportedly, if central banks and banks issue their own cryptocurrencies, it could have bad effects for bitcoin and others.
“The arrival of permission cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”
It has been specified by the report that the digital currency market is
“characterised by competition between currencies (inter-cryptocurrency market) and competition between exchanges (intra-cryptocurrency market).”
The report states the anti-competitive factors, standardization of distributed ledger technology (DLT) and other technical protocols, denial of access to the gateways of traditional banking activities, and private or public consortia agreements in relation to technical standards.
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Leveraging market power to limit competition
So, if central banks and banks enter into the crypto market with their own digital currency, “the market power of banks in traditional banking services might be used to limit competition in the cryptocurrency market through pre-emptive acquisitions or predatory pricing schemes.”
EU has repeatedly emphasized that “more worrisome may be the use of cryptocurrencies promoted by banks, even by central banks.”
Though, “these types of cryptocurrencies may broaden the number of competitors but could also help leverage the market power of banks in traditional banking services” points out the author.
“If banks decide to enter the field of cryptocurrency payments, they may try to block access on interoperability grounds, in a similar way to that observed in the market for payment services. Cryptocurrencies developed by large financial players, however, are still at a relatively early stage, and it is not possible to assess with any degree of certainty the type of competition challenges that they may pose in the medium term.”
Moreover, the international nature of cryptos also presents a challenge to their competition policy as well.
“Many of the players operate from global locations outside the jurisdiction of European competition authorities, which makes investigation or prosecution on anti-competitive behaviors more difficult.”
The report further notes that Europe leads in wallet and exchange services with 42% and 37% respectively. But lacks in the mining area as it only accounts for 13% of the mining market.
The post Bitcoin Future in Danger, Central Banks can Manipulate Competition in Crypto Market: EU Warns appeared first on Coingape.
Written by Sagar Saxena @ https://coingape.com/bitcoin-future-in-danger-eu-warns/ July 23, 2018 Sagar Saxena