A recent report prepared for the European Parliament has identified “digital currencies” as one of the key areas representing the evolution of fintech services.
The report, “Competition issues in the Area of Financial Technology (FinTech)”, has been prepared for the Committee on Economic and Monetary Affairs, Finextra reported.
According to the report, the competition in the cryptocurrency markets has been characterised in the context of competition between currencies (inter-cryptocurrency market) and competition between exchanges (intracryptocurrency market). The authors further identify “potential anticompetitive” factors in the cryptocurrency market:
Denial of access to the gateways of traditional banking activities
The report said that the market power of the traditional banking sector might be used to limit competition in the intracryptocurrency market through pre-emptive acquisitions or predatory pricing schemes.
The authors emphasized on the possibility of incumbent banks engaging in anticompetitive practices by denying access to their gateways for exchange or wallet services, such as bank payment and transfer systems or card processor schemes.
“This denial of access may be conducted by means of low service quality, delays in negotiation, proprietary technical standards or excessive pricing,” it added. “These practices may deter consumers from using the permission-less cryptocurrencies in favour of the permissioned ones promoted by banks.”
Also, in case of inter-cryptocurrency market, the report noted that permissioned cryptocurrencies, promoted by banks, even by central banking authorities, “will reshape the current competition level in the cryptocurrency market, broadening the number of competitors.”
Standardisation of distributed ledger technology (DLT) and other technical protocols
The report said that private or public consortia agreements in relation to technical standards could affect the market entry or have an impact on current costs.
