The European Union has issued a warning over cryptocurrency’s future, cautioning that bitcoin and other decentralized digital currencies could be derailed by central banks around the world.
A report conducted by the European Parliament titled ‘Competition Issues in the Area of Financial Technology’, revealed that if banks and central banks were to get onboard the cryptocurrency scene by issuing their own digital coinage, it could mark the beginning of the end for the likes of bitcoin.
As the authors noted:
“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.
“However, the market power of banks in traditional banking services might be used to limit competition in the cryptocurrency market through pre-emptive acquisitions or predatory pricing schemes.”
The report was commissioned by the European Parliament Committee on Economic and Monetary Affairs (Econ), which oversees policies made by the EU European Central Bank (ECB). As well as providing analysis into cryptocurrencies, the report examines the future of personal finance, wealth management, banking, insurance, and forex.
Lack of competition in mining
The study found bitcoin could be at risk due to a lack of competition within the mining industry, where a whopping 79% is controlled by just five mining pools.
Further warning over cryptocurrency’s future the report highlighted the global nature of crypto markets acting as a challenge to European competition policy.
“Many of the players operate from global locations outside the jurisdiction of European competition authorities, which makes investigation or prosecution on anticompetitive behaviours more difficult,” said the report.
“Europe leads, at international level, the supply of wallet and exchange services, with 42% and 37% in terms of number of players. It is also the principal actor in payments (33%). Nevertheless, the main weakness of Europe is the concentration of the mining activity on non-European countries (Europe only captures just 13% of the current mining market),” the authors added.
Europe leading crypto innovation
The EU’s warnings come despite recent bitcoin rises. This year, Bitcoin Cash has been faring particularly well, with prices rising more than some other cryptocurrencies.
Europe also seems to be leading the way in cryptocurrency innovation. For example, Bulgaria recently launched the first crypto ATM machines, while Slovenia became home to the first Bitcoin City.
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Author: Gabrielle Pickard-Whitehead
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