A new report titled “Virtual Currencies And Central Banks Monetary Policy: Challenges Ahead” by the Economic and Monetary Affairs Committee of the European Parliament is making headlines for presenting a supportive stance on digital currencies in the Eurozone.
The E.U. suggested that virtual currencies are a “contemporary form of private money” while disregarding the bearish stance of several experts, including economist Robert Shiller.
Supporting Digital Currencies
The E.U. report stated, “thanks to their technological properties, their global transaction networks are relatively safe, transparent, and fast.” It also explained the benefits of the use of these currencies.
The document further read:
“This gives them good prospects for further development. However, they remain unlikely to challenge the dominant position of sovereign currencies and central banks, especially those in major currency areas. As with other innovations, virtual currencies pose a challenge to financial regulators, in particular, because of their anonymity and trans-border character.”
Bans and Concurrent Regulation Aren’t Effective
The report also stated that regulations are not adequate to ban the digital currencies completely. It mentioned the regulations effective in People’s Republic of China and the United States and suggested that “financial regulations always lag behind financial innovations.”
“one cannot have the illusion that even the strictest regulations and bans can entirely eliminate the use of VCs as a means of payment in cases of private transactions (especially cross-border ones) or as a store of value (a financial asset in which some economic agents will be interested to invest). The cross-border harmonization of financial and tax regulations and the cooperation of financial regulatory authorities is never perfect, which will leave room for cross-border arbitrage.”
Are Crypto Bears in a Delusion?
The report specifically pointed out the statements made by a few experts on the “death” of Bitcoin and the virtual currencies, calling them “mistaken.” The report stated:
“The economists who attempt to dismiss the justifications for and importance of VCs, considering them as the inventions of ‘quacks and cranks’ (Skidelsky, 2018), a new incarnation of monetary utopia or mania (Shiller, 2018), fraud, or simply as a convenient instrument for money laundering, are mistaken.”
The E.U. authorities claimed that virtual currencies respond to market demand and most likely “will remain with us for a while.”