Dutch Monetary Authority: Cryptocurrencies Impact Central Bank Processes, Calls for Global Regulation

According to members of the Executive Board of De Nederlandsche Bank (DNB) Steven Maijoor and Olaf Sleijpen, several responsibilities and objectives of central banks and regulatory agencies are being impacted by bitcoin, tether, and other digital currencies. The two discussed a recent study on the explosive growth of cryptocurrencies called “Crypto-assets: Evolution and Policy Response.”

“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,” said the Dutch central bank in a post titled “Proper regulation indispensable for risky cryptos.”

The DNB is highlighting the significance of quickly understanding global regulations for cryptocurrencies. Regarding the potential for holding and transferring assets without a major party, the bank believes that appropriate regulation would allow harnessing their unique added value while avoiding impeding innovation owing to the risks associated with their speculative nature.

The research’s authors conclude that “obviously, unbacked cryptos like bitcoin are not suitable for use as money” due to the volatility of their values, which prevents them from serving as a means of exchange, a store of value, and a unit of account. They draw attention to the abundance of digital currencies, which, as they argue, may be misleading regarding price, in addition to the absence of underlying assets.

The DNB explains that stablecoins, backed by assets like euros, dollars, or other currencies, should minimize such volatility. This will further the advantages of decentralized transaction settlement. For instance, these crypto-assets can help make cross-border payments more affordable, but their broad usage could endanger financial stability if it is not properly regulated.

The Dutch central bank notes that recent EU legislation, such as the Markets in Crypto-Assets Regulation (MiCA) package, distinguishes between supported and unbacked cryptocurrencies and imposes restrictions on issuers and market participants. De Nederlandsche Bank observes and promises to contribute to international standards in that area that rules, regulations, and monitoring can never eliminate hazards, if only due to the worldwide nature of cryptos.

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