European Parliament issues cryptocurrency warning

The European Parliament has released a 163-page report in which it suggests that banks and central banks launching their own cryptocurrencies could mark the beginning of the end of Bitcoin and altcoins.

“The arrival of permissioned cryptocurrencies promoted by banks, even by central banks, will reshape the current competition level in the inter-cryptocurrency market, broadening the number of competitors,” says the study entitled ‘Competition Issues in the Area of Financial Technology (FinTech)’.

“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 central banks or traditional banks could be planning to use those permissioned (centralised) cryptocurrency systems in an attempt to complement or substitute the permission-less (decentralised) currencies already in use,” the study cautions.

It highlights the fact that “incumbent banks” can engage in anticompetitive behaviour by denying FinTech startups and cryptocurrencies access to “the gateways of traditional banking activities, such as payment systems for bank account transfers or card processor schemes”.

The authors of the report say investigation and prosecution of anticompetitive behaviours are complicated because of the international nature of cryptocurrency markets. They also note that the advanced cloud services market is dominated by a “small number of big tech companies” which makes it very difficult for new actors to access the sector.

The study also warns that cryptocurrencies offer technological and operational examples that are a source of disruption of the entire sector, including monetary and financial stability.

“If distributed ledger technology is open, or permission-less, everyone can develop any of the activities without requiring any market entry authorisation, even leaving the system without any regulation,” it states.