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German Finance Minister Questions If Crypto Can Replace Fiat Currencies

Olaf Scholz, Finance Minister of Germany, doubts that virtual currencies can replace traditional fiat currencies at present, according to the reports.

He said at the German-Dutch Army Corps in Münster, “I would doubt today, whether it has a perspective as a currency model”. Scholz compared virtual currencies to the tulip fever bubble in the Netherlands in the 17th-century stating, “and the danger is great that there will be such tulip inflation.”

Scholz said that the important computer processes for the mass implementation of digital currencies are so costly and energy-intensive that it couldn’t work, but that he didn’t wish to speak for the future “20 to 30 years”.

According to him, cryptocurrencies should also be carefully observed by regulators, since they could be used for terrorist funding, tax avoiding or other criminal activities. He further added that “…we do not believe that they already have an economically significant importance today.”

European legislators have faced in several capacities in the last several weeks for discussing their concerns over cryptocurrencies as well as the potential remedies to problems related to digital assets.

Members of European Parliament, on September 4, met to discuss regulations for ICOs (Initial Coin Offerings) which require more regulatory oversight under the sight of many European legislators, while being “exciting and promising vehicle instruments.

In a meeting chaired recently by the Economic and Financial Affairs Council in Vienna, the Vice-President of European Commission Valdis Dombrovskis claimed that crypto requires further regulation. Noting that the crypto is here to stay in the market, Dombrovsksis emphasised that the EU (European Union) will focus on the development of regulatory mapping and crypto asset classification.

Before the meetings mentioned above, a report by Bruegel, the Belgian think tank moved European regulators to adopt uniform regulations on digital currencies at the EU level. The provided report also notes that where regulations are left to national entities, there is a chance for “regulatory arbitrage” for crypto businesses.