by Nuno Menezes
The European Parliament Committee on Economic and Monetary affairs commissioned a report on cryptocurrencies with the goal of understanding the impact of the new technology on the future of finance and central banking. On July 2, 2018, the report was released and suggests cryptocurrencies are here to stay.
Report says Cryptocurrencies are tied to the Future
The report is called “Virtual currencies and central banks monetary policy: challenges ahead” and has generated a new insight on how cryptocurrencies work, what have they come to be and what will they become in the future.
Marek Dabrowski and Lukasz Janikowski are the authors of the report. Both the authors are well known scholars in economics and are both members of CASE, the Center for Social and Economic Research which is an independent economic research organization. The authors tried to give the best insight by examining the current state of virtual currency usage and crypto markets to come to logical conclusions over the matter.
Cryptocurrencies as a financial instrument
According to the report, economists and investors that usually refer to cryptocurrency as a type of instrument which works as a convenient form of money are partly wrong as they fail to recognize that the distributed ledger technology allows for a greater transparency.
Additionally, it decentralizes all the transactions without making them exposed to single point of failure or third party to turn it feasible and as so, it seems to be perfectly oriented to the future needs of international finance and online banking.
The report stated:
“Economists who attempt to dismiss the justifications for and importance of VCS, considering them as the inventions of “Quancks and Cranks” (Skidelsky, 2018), a new incarnation of monetary utopia or mania (Shiller, 2018), Fraud, or simply as convenient instruments for money Laundering, are mistaken.”
While they argued that cryptocurrencies are not a threat to the central bank fiduciary system, it recognized that in some cases, like the Venezuela case; apart from a means of exchange, cryptocurrencies can also serve as a tool that enables people to preserve their savings due to the failure of their currency or government tyranny.
A positive remark in this report is that the authors recommend the instruments should not be banned and instead governments need to make an effort in finding the right way to deal with them. They also point out that this sort of instrument is still a novelty and due to its worldwide characteristic it would be very difficult to impose or restrict its use.
Contrary to this, the report advises that to issue specific regulation for the use and trade of cryptocurrency as an investment instrument. Many countries are doing so right now.
In conclusion, the report stated countries need to accept the fact that cryptocurrencies are here to stay.