A European Parliament study has pushed for the development of a central bank digital currency to disrupt the cryptocurrency market - a month after it claimed the emerging technology posed no real threat to central banks
The European Union has pushed for the development of a central bank digital currency to disrupt the cryptocurrency market.
An EU Parliament study released also fretted about the state of competition in the digital currency sector, warning against “hypothetical cartels”.
The European Parliament Committee on Economic and Monetary Affairs (ECON) report, published on Friday last week, comes a month after the body said major central banks would not be threatened by digital currencies in the near future.
The latest study said: “These cryptocurrencies offer technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.
“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”
It also labelled digital currencies like Bitcoin, Ethereum and Ripple as “technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability”.
ECON went on the express worries about competition in the virtual currency market, and the failure of traditional competition law to deal with the sector.
The committee said cryptocurrencies with a lot of users were creating barriers of entry in the market because of a “lack of adhesion to its use in merchants, wallets, or exchanges”.
Commenting on future competition in the market, the study read: “In the future, network effects may lead to potential collusive agreements between members of hypothetical cartels.”
ECON added that cartels in cryptocurrency “mining pools” were also a possibility, but that there was “negative proof of their existence”.
Talk about the introduction of a central bank digital currency from the European Union comes after it introduced rules limiting anonymous digital currency payments through pre-paid cards earlier this month.
It said the regulations were aimed at clamping down on money laundering and the financing of terrorism through cryptocurrencies.
Bitcoin value spikes as South Korea creates cryptocurrency division
The value of major digital currencies has not been dented by the EU report pushing for a central bank digital currency.
At the time of writing, Bitcoin is valued at $7,704.91 per coin while the prices of Ethereum and Ripple sit at $465.44 (£354.47) and $0.45 (£0.34) respectively – according to Coinmarketcap.
The market price of Bitcoin has risen by almost $1,000 (£761.58) in the past week, following a series of dips since December of last year.
Changing attitudes toward cryptocurrency trading in South Korea might be behind the improvement in the technology’s fortune.
Bitcoin and other cryptocurrencies saw their prices tumble when the South Korean government threatened to ban digital currency trading over the Christmas and New Year period, before it backtracked in February.
The Republic of Korea also put a ban on civil servants owning and trading digital currencies in March.
The major cryptocurrency market has now lent more legitimacy to the market, announcing on Saturday that it will set up a cryptocurrency division within its financial regulator, according to Bitcoinist.