According to the European Parliament, rivalries in the cryptocurrency market could be solved by those issued by central banks. The Committee on Economic and Monetary Affairs has conducted a study that has led to this conclusion.
Entitled “Competition Issues in the Area of Financial Technology (Fintech)”, the document highlights the intensification of competition in the cryptocurrency market.
Bitcoin and Ethereum are currently the flagship crypto-currencies of the moment and together account for 90% of the market. “This is a relevant indicator of the current market concentration”.
Network effects are so strong that the two largest cryptocurrencies capture the market by creating a “substantial barrier to entry” of other altcoins.
“In the future, network effects could lead to potential collusive agreements between members of hypothetical agreements,” the report says.
The new cryptocurrencies promoted by banking institutions should upset the current level of competition. The entry of “authorized” rivals will change the game, to oust the supremacy of the BTC and ETH.
Indeed, the cryptocurrency market is failing and tends towards a monopolistic structure. State regulation then becomes necessary, by introducing a policy emanating from the Central Bank. The creation of a digital currency by the State would be the solution.
What about the Libra?
The cryptocurrency project of social media giant Facebook is ahead of governments, regulators and central banks. The Libra , already enjoying a global success , will be launched in 2020 with Calibra, its digital wallet .
Many analysts predict a widespread adoption of the Libra. With billions of users around the world, Facebook will have no trouble putting its digital currency into circulation. The Libra would tend to compete with some sovereign currencies and could even surpass Bitcoin.
Technology companies are gradually becoming involved in the cryptocurrency sector. Conscious of this reality, the European Parliament is trying to anticipate the consequences of the rapid growth of crypto-industry.
The report’s authors added:
“The field of FinTech is still very young and in constant evolution. This is the reason why there is still no established practice on how to deal with competition concerns and the official decisions of the competition authorities have not yet come into being “.
In parallel, central banks are thinking of creating their own virtual currencies . The People’s Bank of China (PBOC) and the Turkish central bank are among them. Moreover, the Chinese State Council has endorsed the PBOC. For its part, the eleventh Turkish development plan 2019-2023 highlights the issuance of a virtual banking currency based on the Blockchain.
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