Cryptocurrency Ban Would Be Difficult To Enforce – Dutch Central Bank
Smart Planet
The Central Bank of the Netherlands (DNB) said cryptocurrencies do not pose a financial stability risk.
In a position paper, the central bank said that the cryptocurrency industry is too small to pose a risk to the financial system. The cryptocurrency market holds a market cap of half a trillion dollars, which is very small when compared to the US dollar or euro.
However, the central bank noted that any sudden depreciation of the value of cryptocurrencies may lead to a significant harm to consumers. It warned investors to be very cautious about their crypto investments because there is no safety net against any big loss, as the market is unregulated.
While skeptical about the complications of cryptocurrencies, the central bank sees certain potential in blockchain technology. DNB said it had been working on four projects based on the technology since 2015. The aim was not to launch its own cryptocurrency, but only to understand the technology better.
According to the bank, the results of these projects confirm that blockchain is not yet mature enough to play a role in the Netherlands’ payment traffic. It cited the technical issues of blockchain, like slow networks, inability to handle large numbers of transactions per second, and lack of sustainability. Nevertheless, the bank noted that blockchain is interesting and may eventually offer opportunities in the financial world. These include the validation of documents, verification of identities, and transactions.
Regarding crypto regulations, the central bank said it is against any nationwide ban. DNB noted that the decentralized nature of the cryptocurrency market would make it very difficult to impose any type of ban in a given country or region.
In addition, Dutch Minister of Finance Wopke Hoekstra said he is looking forward to seeing what his French and German colleagues come up with in regards to cryptocurrency regulations.
Last week, France and Germany’s finance ministers agreed to launch a joint crackdown on the cryptocurrency markets. French Finance Minister Bruno Le Maire said that the countries will make joint proposals to regulate bitcoin at the next summit of the G20 group.
Hoekstra said that “once it is there,” he will study the proposed regulations “with attention” and then see what they will do in the Netherlands.