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EU Study: International Nature of Cryptocurrency Markets Is a Challenge for Regulators

EU Study: International Nature of Cryptocurrency Markets Is a Challenge for Regulators

An EU study claims that the international nature of the cryptocurrency markets is a challenge for European regulators because many players, especially miners, are outside their reach. The researchers also expect that bank-issued coins could reshape the balance of power among cryptos, with commercial banks using underhanded tactics to stifle the competition.

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Regulatory Challenge

EU Study: International Nature of Cryptocurrency Markets Is a Challenge for RegulatorsA recent study titled “Competition issues in the Area of Financial Technology”, which was requested by the European Parliament Committee on Economic and Monetary Affairs, raised a couple of interesting issues from a regulatory point of view. First, the researchers say that the international nature of cryptocurrency markets is a challenge to the implementation of competition policy at the European level.

The paper explains that many of the players operate from locations outside the jurisdiction of EU competition authorities, which makes investigation or prosecution more difficult. The main weakness of European regulators is the concentration of the mining activity in non-European countries. The researchers write: “Mining is the most strategic, sophisticated and technology dependent activity in the cryptocurrency market, and there currently appears to be a significant concentration of mining activities occurring in certain Chinese provinces.”

Bank-Coins to Reshape Competition?

EU Study: International Nature of Cryptocurrency Markets Is a Challenge for RegulatorsThe EU study also claims that the arrival of “permissioned cryptocurrencies” issued by banks, both commercial and central, will reshape the current competition level in the cryptocurrency market. A potential inadequacy of traditional policy to address competition issues in the cryptocurrency markets can be found, “suggesting direct public participation through a central-bank digital currency as a remedy.”

The researchers warn that the market power of incumbent commercial banks might be used to limit competition in the cryptocurrency market through preemptive acquisitions or predatory pricing schemes. The banks may also engage in anti-competitive practices by denying access to their gateways for exchange or wallet services, such as payment and transfer systems or card processor schemes. This may be conducted by means of low service quality, delays in negotiation, proprietary technical standards or excessive pricing. They say that these practices may deter consumers from using normal cryptocurrencies in favor of those promoted by the banks.

Is the international cryptocurrency market being outside of a single regulator’s reach really a problem for competition? Share your thoughts in the comments section below.


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Tags in this story
Anti-Competitive, Bank Coin, Central Bank Coin, competition, EU, EU Regulation, Europe, European Union, N-Regulation
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Avi Mizrahi

Avi Mizrahi is an economist and entrepreneur who has been covering Bitcoin as a journalist since 2013. He has spoken about the promise of cryptocurrency and blockchain technology at numerous financial conferences around the world, from London to Hong-Kong.