Banks secretly “attacked” cryptocurrencies. The digital euro is the first part, then we will lose financial privacy

“We’re still at the beginning.” This is also a statement made by many experts and cryptocurrency enthusiasts, who have experienced perhaps the biggest boom in their history in the last year.

It is not just the “exterior”, ie their prices converted into fiat money, such as euros and dollars, for which they are sold on stock exchanges, but we are currently witnessing new possibilities for their implementation.

Again, it is not just El Salvador, who is much praised and damned by many, that has approved the largest cryptocurrency, bitcoin, as legal tender, but especially thousands of companies and institutions that have begun to accept cryptocurrencies.

In addition to the possibility of paying them via Apple Pay or buying coffee in selected companies for bitcoin, more and more indicators are emerging that technological giants such as Apple and Amazon are gradually sinking into cryptocurrencies.

At present, the fact remains that no fiat mena beats most well-developed cryptocurrencies in versatility, speed, availability, and in some cases sustainability.

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The struggle between the private and public sectors begins, who has the upper hand?

However, with groundbreaking innovations in the private sector in addition to payments and money that move the world, governments around the world, along with commercial banks and other financial intermediaries whose cryptocurrencies are in some way depriving their businesses, have a clear problem.

However, central banks and governments are not afraid of “paying” by cryptomen, as it is currently due to the dominance of fiat money that still has to go through them, but of other possibilities that cryptocurrencies bring.

Perhaps the best example is the decentralized finance system (DeFi), which is often referred to as the “final product of cryptocurrencies”, and decentralization is not only based on the possibility of paying cryptocurrencies, but a huge amount of financial services including loans, savings or trading.

These bring its users more freedom, decentralization, but especially easy access and more interest, as it somehow “excludes” a third party, or in our case a bank or other financial intermediary, from the equation. As a result, some experts in the field believe that DeFi will replace traditional centralized finance and will become a major pillar of our financial system.

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However, centralized finance, which mainly represents central banks and governments, has its own weapon, which can pose a significant threat to cryptocurrencies. These are the state’s digital currencies, which have suddenly begun to appear and develop in recent years, when cryptocurrencies attracted attention.

China is making significant progress, but the digital euro will also come

Probably everyone agrees that the first country to “catch” cryptocurrencies is clearly China. The country’s complicated relationship with cryptocurrencies is nothing new, and we have seen “indications” of their criminalization or reduction of mining in recent years.

However, these culminated in a ban on bitcoin mining in the country and severe restrictions for miners, but also for companies that use cryptocurrencies. At first glance, what may seem like the government’s reluctance to charge up to 65% of China’s huge bitcoin consumption is also a very clever step to “market liberalization” and the advent of the digital yuan, whose testing phase is in full swing.

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Of course, China is not the only country to develop its digital currency. According to recent analysis Atlantic Council countries with developing or functioning digital currencies already account for more than 90% of global gross domestic product (GDP), with a total of 81 digital counterparts of Fiat names already evolving in 81 countries.

What worries proponents of cryptocurrencies, however, is the fact that their harsh regulations in China came at exactly the time of the “start-up” of the digital yuan, and it is so clear that China is trying to replace cryptocurrencies with its own solution that everyone will use.

This sets a dangerous precedent for the further implementation of digital names in other countries of the world, including the USA or the European Union, along with Slovakia. Of course, China has the means to expand the digital yuan very quickly in its own country and even has plans to fully implement it during the 2022 Winter Olympics in Beijing.

So should we fear similar bans and restrictions on cryptocurrencies in the “Western world”? The development of the digital euro is also hidden from the European Central Bank (ECB), which has only recently fully launched its research phase, which is to last two years.

And while it is not yet “clear” whether the digital euro will finally be launched and the ECB promises to keep cash, it is unlikely that the European Union will want to lag behind in this direction and we will most likely see a digital euro in the near future.

State solutions will offer speed and efficiency, but by no means anonymity

Perhaps the biggest and most dangerous difference between state digital names and cryptocurrencies is centralization. According to experts and analysts in this field, including Juraj Karpiš from INESS, whom we are concerned about the digital euro recently confessed, central banks want to not only compete with cryptocurrencies through digital currencies, but to get the entire money supply under control, which has not been possible so far.

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Even a citizen who doesn’t care so much about the speed of transactions and efficiency would probably not be too thrilled if the central bank had immediate access to all his transactions, whether he bought coffee at the pump or received a monthly payment.

However, all this goes hand in hand with the fact that the digitization of state fiat names will undoubtedly bring the benefits of cryptocurrencies, which will be felt by every consumer. However, with instant payments, free currency distribution or state savings that will be accessible to everyone, the main ideas of cryptocurrencies – freedom and independence – may be lost.

No need to wear pink glasses, cryptocurrency awaits regulation

With the advent of state digital names, it is so reasonable to expect that cryptocurrencies will not avoid tougher regulation in our country either. It must not be forgotten that in the European Union we probably do not have to worry about bans on mining and criminalizing the use or possession of bitcoin, but there is no doubt that a “government alternative” will come on the market, which the state will try to promote at all costs.

Digitization still rules the world, and whether we see the “state cryptocurrency” in 2, 5, or 10 years, its arrival is likely to be associated with the indirect expulsion of cryptocurrencies from the market through various measures and restrictions.

The initial indication of these changes in the EU may also be a recent proposal from the European Commission, according to which companies in charge of the transfer of cryptocurrencies and other digital assets will have to collect data on shippers and recipients to help the authorities take action against fraudsters.

In conclusion, however, it should be recalled that even the toughest scenario of the advent of state digital currencies will not jeopardize the existence of cryptocurrencies.

Cryptocurrencies have been and will always be a free alternative to state money, because they are unmanageable and, thanks to the existence of the Internet, no one can ban them completely, but the advent of state alternatives can jeopardize their future in part. The fate of cryptocurrencies is in the hands of government regulators, as well as millions of their users, who can become billions.