According to a report that is coming from a Financial Stability Committee which was set up by the German government to look into the effect of cryptocurrency on the German economy, the effect of cryptocurrency on the German economy is insignificant and does not pose a threat to Germany’s financial stability. Whilst there are quite a number of reasons for this, most prominent among them are the volatility of cryptocurrency markets, the extremely high transaction costs of cryptocurrencies, and the lack of total acceptance of cryptocurrency among the German people.
The German Government Committee Believes Cryptocurrencies do not qualify as “Currencies”
The financial stability committee which was set up by the German government in addition to stating some of the basic flaws of digital currencies and giving reasons why they do not pose a threat to the financial stability of the German economy has also described cryptocurrencies as objects of speculations. According to this committee, cryptocurrencies do not qualify to be called “currencies”, rather, they should be called “tokens”. The reasons for this are quite simple, digital currencies cannot be used as a means to store value, they cannot be used as a measure of calculation, and they cannot play the role of a means of regular payment. With this perceived weaknesses that are associated with cryptocurrencies, it has been reported by the financial stability committee that cryptocurrencies are not a threat to the financial stability of Germany.
The Financial Stability Committee is still monitoring the Development of “Crypto-tokens”
As it stands, the committee that was set-up by the German government has concluded that in the meantime, “crypto-tokens” do not threaten the German financial stability. In spite of this, this committee has continued to keep an eye on the further development of digital currencies in the German economy. According to this committee, the reason for the continuous monitoring of the cryptocurrency development in German is “the connection to the traditional financial system could become tighter in the future, for example, if the trading of crypto-token derivatives on recognized stock exchanges, such as Bitcoin futures contracts, establish themselves in the segment. The Committee will, therefore, monitor further developments, but currently sees no reason to intervene for macro-prudential reasons”.
This is not the first time that it is being reported by the German Financial Stability Committee that cryptocurrencies are not a factor in the German financial system. The first time this statement was made was sometime in early June. This therefore implies that this statement can be trusted.