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'We do not see cryptos as money'

Published: 08 November 2022

DNB-experts Vera Lubbersen en Peter Wierts

It will have escaped few people's notice: cryptos are going through a stormy development. Two million Dutch people have already invested in them. DNB experts Vera Lubbersen and Peter Wierts took a close look at all the developments. An interview on the pros and cons, how cryptos fit in our money system, and what new regulations will mean for crypto providers.

What exactly did your research focus on?

Peter: 'We had three main questions for our study. First, are cryptos a form of money? And why have around two million people in the Netherlands invested in cryptos? Second, what opportunities and risks do cryptos present? How do we view these opportunities and risks, and how do others see them? What do the crypto sceptics and the crypto believers have to say? Third, what do we think of the forthcoming regulations for crypto providers?'

'One thing is clear: DNB's role will expand in the years to come. This is why we conducted this comprehensive study: to provide a basis for our policy response.'  

One of the study's conclusions is that cryptos are not money. Can you explain? 

Vera: 'Indeed, we do not see cryptos as money. The crypto markets suggest that cryptos can function like money, but this is simply not true in practice. Cryptos lack the characteristics of money. Most importantly, the value of a crypto can be much higher or lower from one moment to the next, so you never quite know how much it is worth. These big fluctuations in value also mean you can't count on cryptos if you want to save. And anyway, there are only a few places where you can pay with cryptos.'

What are cryptos exactly?

'We see them as an investment whose value can change significantly. And they are apparently an attractive investment for two million Dutch people. Cryptos are popular for a reason: everyone wants to make money, preferably as quickly as possible. We sit glued to our screens hoping to see the value of our investment rise. And we are all afraid of missing the boat. The hype is huge, people feel like they have to part of it.'

'People also need to hear the full and honest story: that you can also lose a lot of money with cryptos. We hope that our study will give people greater insight into how cryptos work so they understand what they are getting into.' 

A clear warning. Do you have anything positive to say about cryptos? 

Peter: 'Certainly. The technology behind cryptos represents a major innovation. For example, you can make a nearly instantaneous payment from A to B all over the world and without a central party. That's very interesting. And the system is maintained by computers around the world. We don't really need such a system here in the Netherlands, as we already have instant payments. But paying internationally can be a lot more complicated. This technology can really make a difference, especially considering there is no global central bank.'

Why is DNB concerned about cryptos? 

Vera: 'Cryptos have become a major factor in the financial landscape, so we think it is important that they are properly embedded in our financial system. As part of our public duty, we want to contribute to this development and share our expertise and insights. Cryptos touch on every single one of our tasks: our supervision of crypto providers, our supervision of payment systems and specifically the technology behind them, along with our economic advisory role and our responsibility to detect financial risks in society. This is what made it so important for us to conduct this study and write this report, to show what the opportunities and risks are, and also what DNB can and cannot do as cryptos continue to evolve.'  

You also write about new regulations in your report. Can you say more about that?   

Peter: 'DNB's supervision of crypto providers is limited at present. Regulation is currently only aimed at countering money laundering and the financing of terrorism along with violations of sanctions law. We are intensely engaged in these activities. But there are no rules to protect crypto users yet, for example. The stormy development of cryptos in recent years has given rise to widespread international agreement that regulations now need to be expanded quickly.'  

Vera: 'The most important new rules are coming from Europe. The Market in Crypto-Asset Regulation, MiCAR, is legislation that is going to benefit crypto investors as well. For instance, it will require crypto providers to disclose much more detailed information about their products to consumers and to have complaints procedures in place. MiCAR is likely to take effect in 2024, so we are already working on giving shape to our supervisory activities. Sometimes you hear people in the crypto ecosystem say: "cryptos are unique, you can't supervise and regulate them", but of course that is not true: it is a gradual process to comprehend such a major development and make it as safe as possible for everyone

'So regulation and supervision are still evolving, and it is important to understand that they cannot eliminate all risks. Anyone getting into cryptos should do everything they can to learn about the risks involved.'

Would you like to read more about how it all works? See our report Crypto assets: evolution and policy response.

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