Central bank digital currencies could remedy crypto’s ‘competition issues,’ EU study says

Fibo Quantum

Central bank digital currencies (CBDCs) could solve the “competition issues” in the cryptocurrency sector, according to a study requested by the European Parliament Committee on Economic and Monetary Affairs. 

While competition between cryptocurrencies is growing, it is still relatively limited, the study reads. As of 2017, bitcoin and ethereum accounted for 88 per cent of the total cryptocurrency market capitalisation, pointing towards market concentration. 

The paper argues that the issuance of CBDC could introduce new players to the field and potentially dilute the dominance of existing tokens. “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,” the study reads.

It also pointed to the “potential inadequacy of traditional competition policy” when looking at the cryptocurrency space, and argued that direct public participation through a CBDC could be an unconventional but viable remedy.

The study also highlighted that the international nature of the cryptocurrency market poses a challenge in safeguarding Europe.