Researchers-economists came to the conclusion that the issue of crypto-currencies by Central banks can help to compensate for the shortcomings of the competition policy in the cryptocurrency sphere. The conclusion was obtained in a study on the issue of competition in financial technology, conducted on behalf of the Committee on economic and monetary Affairs (ECON) of the European Parliament. The text was published on 20 July.
According to researchers, the appearance on the market of digital currencies issued by Central banks (CBDC), will increase the number of parties competitive race, because the cryptocurrency market will be able to enter ordinary people. The text explains that the key difference between a digital currency issued by Central banks, from private is that they are based on the traditional bilateral settlement with the presence of a trusted Central party, and thus investments in CBDC less risky and investors are guaranteed legal protection.
In addition, the authors are convinced that the release of CBDC as a complement or replacement of existing currencies would allow the state to better control the closed cryptocurrency sphere.
The study also addresses the main weak points of competition in the cryptocurrency field. For the correctness of the conclusions economists have identified two types of competition: between different cryptocurrencies between exchanges and service providers. As for the first type, here the main problem is the presence of network effects, i.e. the effect in which the users of the cryptocurrency have an impact on its value for other users. Thus created the popularity of the one or more digital currencies can be a barrier to market entry for new currencies.
The same problem may occur for the second type of competition. Existing cryptocurrency wallets, exchanges and payment services can create conditions that will deter other companies and prevent them to enter the market. Such conditions include, for example, corruption schemes with the participation of the miners interested in mining for a specific cryptocurrency.
Interestingly, bitcoin (BTC) the study is described as a “source of destabilization of the entire financial technology sector, including monetary policy and financial stability”. The same effects, according to experts, the cause and other new technologies: artificial intelligence, the blockchain, the Internet of things, augmented reality and others.
Recall that in July a group of researchers and economists published a report on cryptocurrencies on request ECON of the European Parliament, which called the ban on digital currency impractical. The researchers also noted that cryptocurrency, in particular bitcoin, “a relatively well-protected.”
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