Cryptocurrencies will not challenge the economic power of central banks, the European Parliament said last week.
In the latest Monetary Dialogue report issued on June 26, the European Parliament’s Committee on Economic and Monetary Affairs said that while cryptocurrencies have made financial transactions “relatively safe, transparent, and fast,” they pose no threat to sovereign currencies around the world.
The analysis, which was conducted by the Center for Social and Economic Research, a non-profit research institute based in Warsaw, first recognized the positive changes cryptocurrencies have brought to financial transactions, noting that they now “are used globally, disregarding national borders.”
Cryptocurrencies “respond to real market demand,” the analysis claimed, and they will have the potential to become a “full-fledged private money” or even a permanent element to the global economy.
However, the researchers said it is “unlikely” cryptocurrencies will threaten central banks and sovereign currencies and dismantle the existing monetary structures, especially in countries where their sovereign currencies are widely circulated.
At present, according to the analysis, the total value of all cryptocurrencies circulating in the market heavily underweigh the value of major sovereign currencies in circulation.
But a few exceptions exist. The report cited runaway inflation in Venezuela and noted that in much smaller monetary jurisdictions, cryptocurrencies “may” offer alternative to unstable currency.
In addition, the analysis suggested that financial regulators should treat cryptocurrencies as “any other financial transactions or instruments,” given the potential risks associated with transactions using cryptocurrencies, including money laundering, tax evasion, and financing illicit activities.
Cryptocurrencies image via Shutterstock.