EU Report: Cryptocurrencies Unlikely To Threaten Central Banks Economic Power

European Parliament does not expect cryptocurrency to challenge the economic power of central banks in the near future. While virtual currencies have made financial transactions relatively safe, transparent and safe, the European Parliament Committee on Economic and Monetary says it does not expect them to pose any threat to sovereign currencies.

The committee’s stance is based’ on a new report by the Center for Social and Economic Research, which underlines the positive changes brought about, by cryptocurrencies to financial transactions. According to the nonprofit research institute, based in Warsaw, cryptocurrencies have the potential to become fully fledged private money or a permanent element to the global economy.

However, the research firm does not expect virtual currencies, to threaten the role played by central banks let alone sovereign currencies. The fact that the crypto market is still relatively new, means cryptocurrencies face the problem of being recognized as a legal payment method by various authorities

According to the European Parliament Committee on Economic and Monetary Policies, the demand for reserve money (central bank’s money) has increased ever since the financial crisis of 2008. The fact that financial institutions continue to disregard cryptocurrencies because they allow users to remain anonymous also means they are unlikely to threaten the role of central banks in future.

A number of authorities around the world have continued to shun cryptocurrencies more so privacy-focused Altcoins on concerns criminals are using them for money laundering among other illegal activities. Regulators have since been urged to treat cryptocurrencies as any other financial instrument given the potential risks associated with them.

Cryptocurrencies credibility has also been brought to question in view of recent hacking incidents of cryptocurrency exchanges. Hacking incidences at Coincheck, Bithumb, and Coinrail have gone to fuel skepticism about digital currencies, which were seen as currencies of the future.

The total value of cryptocurrencies still under-weighs the value of major sovereign currencies in circulation. That said it could take years and a change of perception for cryptocurrencies to find their way into the mainstream sector let alone be part of the global economy as envisioned.

However, researchers at the Center for Social and Economic Research, believe cryptocurrencies cannot be discounted as they have a role to play in much smaller monetary jurisdictions. Casing example is Venezuela where a virtual currency appears to be offering an alternative to the country’s unstable currency.