European Parliament report: Cryptocurrency technology facilitates cross-border transactions, but regulation remains a big problem

The European Union recently agreed to set up an expert group to study the application of digital currency and blockchain technology. So what does it think of this emerging technology?

The European Parliament recently released a report that expressed the EU's mixed feelings about cryptocurrencies. In the eyes of the European Parliament, cryptocurrencies are a technological innovation, but at the same time, the regulation of cryptocurrencies is also a major challenge.

The European Parliament believes that the function of cryptocurrency is to improve efficiency and reduce transaction costs. This is similar to the impact of Bitcoin on the banking industry. The goals of the European Union (EU), such as reducing cross-border transaction costs, can be achieved through the blockchain technology "behind" Bitcoin.

The report mentioned:

In the payment field, the functions of venture capital firms (VC) and distributed ledger technology (DLT) are to reduce transaction costs and protect transaction privacy.

The volatility and speculative bubbles of cryptocurrencies are of primary concern to the European Parliament.

Many people think that the European Parliament should be impressed by the anonymity and traceability of cryptocurrencies. But this is not the case. The European Parliament does not want the entire system to be completely anonymous, in case of illegal behavior, the criminals may disappear. When blockchain is linked to potential crimes, the European Parliament also recognizes that distributed ledger technology (DLT) can help governments reduce money laundering, fraud and corruption.

Cross-border transactions

The main goal of the European Union is to achieve borderlessness among its members. One example is the Schengen Agreement. Citizens of EU member states that have signed the Schengen Agreement can travel or reside freely in each other. For many years, the EU has been working to reduce roaming charges within member states, but telecom operators still charge additional fees. The cryptocurrency and blockchain fields can help the EU achieve this goal.

Reduce online transaction fees from 2%-4% to 1%, while reducing cross-border remittance fees by up to 7%.

As we all know, Bitcoin is superior in this regard: its system is different from that of banks, not only does it reduce the fees for cross-border payments, but it also does not recognize national borders.

Technical aspects

The technical functions are the main reason for the European Parliament to adopt cryptocurrencies. The European Parliament's focus is on blockchain technology. This technological innovation helps achieve the goal of decentralization. As for other functions of blockchain technology, the European Parliament's views are consistent with those of the banking industry.

A vision without borders

However, there are still some radical ideas about Bitcoin technology, which believe that Bitcoin technology can completely replace the role of banks in the payment field and redefine the functions of central banks. In the eyes of the EU, what kind of inspiration can decentralized currency bring to the EU and its monetary policy? Unfortunately, these issues are rarely mentioned in this report.

This report deliberately raises many questions, opportunities and risks without mentioning the firm determination to develop cryptocurrencies, which is always attributed to the fact that the EU's understanding of blockchain technology only remains at the technical level.

In the near future, can the European Central Bank become a decentralized autonomous organization like DAO? And can the technology behind cryptocurrency like Bitcoin bring a glimmer of hope to the self-contained European Union?

Weakening the banking sector

The report does not mention that Bitcoin has the function of redefining and undermining the banking industry. The euro can learn from Bitcoin's decentralization process.

The European Parliament, like the banking industry, believes that the new technology of cryptocurrency can make cross-border transactions more convenient. However, regulating cryptocurrency has always been a major challenge. The Bitcoin model consists of miners, users, developers, and merchants, and the EU believes that this structure is not satisfactory.

The report states:

Bitcoin represents uncertainty and there are many unforeseen challenges, such as user protection issues.

Cryptocurrency goes beyond central bank functions

Unlike the EU, many people are very interested in cryptocurrencies, especially during times of inflation, which will not be affected.

The European Parliament’s report rarely analyzes cryptocurrencies from a macroeconomic and fiscal perspective, but expresses concerns that cryptocurrencies will weaken the regulatory power in the economic field:

If cryptocurrency, a form of venture capital, replaces fiat currency in the future, the long-term development of monetary policy will be affected.

Such remarks show that the EU is still immersed in the old system. However, most people in the eurozone do not agree with the EU's views.

Euro enthusiasts may also doubt the sustainability of the European Monetary Union. It is conceivable that if the European Central Bank continues to print money to stimulate the economy, financial bubbles, market turmoil, inflation and other crises will follow in the long run.

Europe is not united

EU countries have different ideas and economic strengths. They are independent of each other and often conflict with each other in government affairs and financial strategies. However, with so many countries, there is only one European Central Bank responsible for the affairs of the entire eurozone. Southern countries need to stimulate the economy and reduce debt interest rates, while northern countries have frequent problems such as inflation and economic instability. The European Central Bank needs to deal with the two and seek a balance. The result has caused long-term discord between southern and northern countries.

How can cryptocurrencies help the EU out of this dilemma?

1. ECB Decentralization

Imagine, can we build a decentralized autonomous organization to achieve democratic decision-making and remove the central bank’s arbitrary power over European monetary policy?

The center of this DAO is operated by an algorithm, integrating the opinions of different departments, and each member has the right to vote. This model can directly promote the democratization of monetary policy. This idea is obviously inconsistent with the current reality, but it is very reasonable. As for the current EU monetary policy that respects major powers, cryptocurrency can promote the process of democratization.

2. Bitcoin brings predictability

The operation of this DAO requires the integration of the opinions of all participants, and the monetary policy will be predictable. It can be said that the policy in the short term will not change.

No one knows what the central bank will do next. But for the Bitcoin community, the money supply is written in the code, and anyone can predict its trend in recent years.

This DAO model can also effectively prevent corruption. In this strict algorithm, no one can find other people's contact information or bank accounts.

3. Redefine banking functions

The Bitcoin model redefines the role of banks in two ways. Through Bitcoin’s proof of work, banks no longer have a monopoly on payment transactions.

At the same time, the central bank no longer has the power to issue currency. All along, major banks have received legal tender from the central bank for free and then lent it to ordinary people at high interest rates. Is this approach too arbitrary? People can make money by mining themselves through proof of work.

To some extent, using Bitcoin means abandoning the current monetary policy of the Eurozone. The Bitcoin model will make monetary policy more stable and predictable. This will force the European continent to seek other ways to stimulate economic growth, such as investment in infrastructure, education, environmental protection, technology and other fields to achieve sustainable development and effectively avoid the negative impact of the European Central Bank's "one-size-fits-all" policy.