With the introduction of the Libra project in 2019, the central authorities were mobilized for the issue of cryptocurrencies. Discussions about regulation are increasing and have recently been the subject of proposals from the European Commission. It seems clear that cryptocurrencies that contribute to democratization or hinder the development of the young industry write a crucial page in their history.
Evolution of the cryptocurrency: revolution or regulation?
Prevention on a systemic scale
Since Facebook’s Libra project was announced over a year ago, central authorities have shown great interest in the subject of cryptocurrency regulation. This question of cryptocurrencies was recently discussed at the G7 in July 2020. Stablecoins are in the eyes of the authorities: “Stablecoins and various other products currently being developed, including projects that may have a global and systemic scope such as Libra, raise serious systemic and regulatory concerns that must all be addressed before these projects can be implemented ”- G7, July 18, 2020.
It is remembered that a stable coin is a cryptocurrency with a benchmark asset (such as the dollar, gold or silver …) that reduces its volatility.
Finance ministers’ speeches on regulating cryptocurrency are gaining momentum. Trying to put an end to fraud, money laundering or fraud therefore remains a priority. But the question of the economic and financial sovereignty of the authorities arises far beyond the aspect of control. This is probably the main cause of concern that can warrant this regulation.
MiCA: Crypto Assets Market
This is the title of the European Commission’s publication on the Regulation of Cryptocurrencies.
The latest publication by the European Commission confirmed this willingness to monitor, in particular of utility models or payment tokens. However, these suggestions were quickly the subject of a response from the International Association for Trusted Blockchain Applications (grouping of cryptographies such as Ripple or Lota). While the regulation continues to be positively accepted, it raises concerns about the resulting « costly and complex legal requirements ». Concerns about « new and early-developing markets such as decentralized financing would probably no longer be accessible to Europe and its citizens » are also evident on the part of the association.
Blockchain: the technology that interests the authorities
The upheaval of a thousand year old question
The currency issue has been at the center of the economic problem for hundreds of years. The past few centuries have marked important developments that the blockchain seems to be following. As a reminder, in a video on cryptocurrencies dated August 23, 2020, the IMF qualified cryptos as « the next step in the development of the currency ». This consideration changes many dynamics and more and more central institutions seem to be interested in these new technologies.
The topic of developing institutional cryptocurrencies would therefore raise questions of sovereignty. If each agent is free to choose the currency of his choice, there arises, for example, a loss of the effectiveness of monetary and fiscal policy or a real question of the authority and acceptance of the medium of exchange. Hence the interest of certain institutions in this type of asset. François Villeroy de Galhau, head of the Banque de France, stressed the importance of « having our sovereignty in the face of weighing initiatives ».
Twelve years after the start of this new monetary development, some central authorities are considering introducing their own « cryptocurrency » like the Banque de France with experimenting with a digital currency from the central bank. Such a program requires financial institutions, which can be seen contrary to the nature of cryptos.
In any case, central authorities seem to be addressing the greater digitization of exchanges, the higher speed of transactions, and the greater security that blockchain offers.
The debate on the regulation of cryptocurrency in the euro zone
Pretty strong positions
The European Commission has presented proposals that remain a pillar of the democratization of cryptocurrencies. However, these suggestions may be viewed as too restrictive. Still others have a clear position on this issue. Federal Finance Minister Olaf Scholz said the goal was to lay down clear rules so as not to jeopardize market stability. Olaf Scholz believes that money creation cannot be private.
It is evident that the potential of cryptocurrencies is confronted with the centralization of powers (political, monetary or legal). The industry is therefore looking for a balance that is likely to be reached over several years. An important factor to be considered is the global nature of cryptocurrencies, which over time can lead to more or less harmonized regulations depending on the country. Conversely, if the regulations in force between the euro zone and other countries are too different, « crypto havens » can arise.
Uncovering the landscape and future history of cryptocurrencies
In a statement with his four colleagues, Bruno Le Maire explains: “We will not accept the use of the scales (…) under the current conditions […]. The question is who has the right to issue the currency. Is it the state, the central bank, or just someone? We are the states and the central banks. […] We are waiting for the European Commission to issue very strict and very clear rules to prevent the misuse of cryptocurrencies for terrorist activities or money laundering. Silver « .
The Eurozone is therefore taking the lead on regulation and, more broadly, intending to regain control of a fledgling industry, raising issues of central sovereignty. Help to democratize or threaten the original goal of cryptocurrencies, future decisions in both regulation and development of projects will be closely monitored and there is a risk that a new page will be opened again in the history of cryptocurrencies. This can be a major factor in the price movement of certain cryptocurrencies that are at critical threshold levels.
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