A recent study requested by the European Parliament Committee on Economic and Monetary Affairs and titled “Competition issues in the Area of Financial technology,” brought out some regulatory issues. The first point according to the researchers is that the international nature of cryptocurrency markets is a challenge to the implementation of competition policy at the European level.
It is explained in the paper that most of the actors operate from areas not within the jurisdiction of EU competition authorities. This aspect makes investigation or prosecution more difficult. The concentration of mining activity in non-European countries represents the weakness of European regulators. The researchers wrote: “Mining is the most strategic, sophisticated and technology dependent activity in the cryptocurrency market, and there currently appears to be a significant concentration of mining activities occurring in certain Chinese provinces.”
The same study claims that the arrival of “permissioned cryptocurrencies” released by both commercial and central banks, will give another dimension to the current competition level in the cryptocurrency market. What could be an inadequacy of traditional policy to address competition issues in the cryptocurrency markets can be found, “suggesting direct public participation through a central-bank digital currency as a remedy.”
According to researchers, the market power of incumbent commercial banks can act as a limitation tool to the competition in the cryptocurrency market via preemptive acquisitions or predatory pricing schemes. It is also their belief that the banks might want to engage in anti-competitive practices by not granting access to their gateways for exchange or wallet services that include payment and transfer systems or card processor schemes. Low service quality, delays in negotiation, proprietary technical standards or excessive pricing are ways in which this may happen. They believe that such practices will discourage consumers from using normal cryptocurrencies in favor of cryptos promoted by the banks.