Consistent with the fact that crypto currencies are impacting the functions of global monetary authorities, the Dutch central banking has called for extensive international regulations. This call was made after extensive research and analysis of policy responses related to the development of cryptocurrency assets.
‘Proper Regulation Indispensable for Risky Cryptos,’ Dutch Central Bank Insists
According to Steven Maijoor, Olaf Sleijpen (members of De Nederlandsche Bank’s Executive Board), bitcoin, tether and other digital currencies are impacting many central banks and supervisory agencies, among others. The two presented a new study, “Crypto-assets: evolution and policy response,” into the rapid development of cryptocurrencies.
“While the crypto markets have become somewhat less hyped over the past six months due to global interest rate hikes, investment fraud and cybercrime, cryptos are here to stay, and international financial authorities simply cannot afford to look the other way,” the Dutch central bank said in a post titled “Proper regulation indispensable for risky cryptos.”
DNB emphasizes the need to quickly agree on international rules regarding cryptocurrencies. According to the bank effective regulation will allow for their innovation and potential storage and transfer of value without central parties. However, it also helps to avoid stifling creativity due to their speculative nature.
DNB believes that stablecoins are better than unbacked coins.
The authors of the research conclude that “clearly, unbacked cryptos like bitcoin are not suitable for use as money” as their prices are too volatile to allow them to function as a means of payment, store of value and unit of account. The lack of underlying assets is not the only problem, but they are also concerned about the confusion that comes with pricing digital coins.
Stablecoins are, however, backed by U.S. dollar, euros or any other asset. They also offer the benefit of decentralized settlement. Although these crypto assets may be able to facilitate cross-border payments at a lower cost, their wide use can pose a risk to financial stability if they are not properly regulated.
The Dutch central bank highlights that new EU regulations such as the Markets in Crypto-Assets Regulations (MiCA package) differentiate backed from unbacked cryptos, and establish requirements for market participants and issuers. However, “laws, regulations and supervision will never mitigate all risks, if only because of the international nature of cryptos,” De Nederlandsche Bank notes and vows to contribute to international standards in that area.
What do you think about the De Nederlandsche Bank’s conclusions regarding cryptocurrencies and stablecoins? Comment below.
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