A study on issues of competition in fintech, commissioned by the European Parliament Committee on Economic and Monetary Affairs (ECON), was published July 20. It found that central bank-issued digital currencies could be a “remedy” for a lack of competition policy in the crypto sector:
“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.”
The study mentions cryptocurrencies like Bitcoin (BTC) as “technological and operational paradigms that are a source of disruption for the entire sector, including monetary policy and financial stability.” Other “disruptive and innovative applications” of new technologies include “AI, cloud computing, biometrics, digital identity, blockchain, cybersecurity, RegTech, internet of things (IoT), augmented reality.”
Private digital currencies are defined separately from central bank-issued digital currencies (CBDC), noting that the CBDCs differ by being based on a “conventional bilateral settlement with a trusted central party.”
According to the study, since closed cryptocurrency systems require a supervisory authority, central banks could be considering using “permissioned cryptocurrency systems” to “complement or substitute” the currencies already used.
The study claims that CBDCs “will reshape the current competition level in the inter-cryptocurrency market” by adding to the pool of competitors:
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