ECB blows air into Bitcoin bubble

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Via Coindesk:

Mario Draghi, president of the European Central Bank (ECB), has indicated that his institution does not have the authority to regulate cryptocurrencies.

Making his statements to the European Parliament’s Committee on Economic and Monetary Affairs, Draghi said that “it would actually not be in our powers to prohibit and regulate” bitcoin and other digital currencies.

The comments came in response to a question from the committee over whether ECB intends to issue a regulatory framework or an all-out ban on cryptocurrencies, and whether Draghi felt that higher capital requirements for fintech were required to protect the banking sector.

Draghi revealed that the ECB has yet to discuss the potential impact of cryptocurrencies, but likely areas of analysis include the risk posed by cryptocurrency due to its scale, usage and economic impact.

“We have to ask what effects cryptocurrencies have on the economy,” Draghi stated, adding that they are still too immature to be considered a viable method of payment.

The primary concern for the ECB surrounding cryptocurrencies, and digital innovation more generally, is cybersecurity, he went on, stressing that protecting against cyber risks is central to the ECB’s agenda.

Earlier this month, Draghi also criticised the proposed initiative by Estonia’s e-Residency project to launch a national cryptocurrency called “estcoin,” reportedly stating:

“I will comment on the Estonian decision: no member state can introduce its own currency. The currency of the Eurozone is the euro.”

Draghi is not the only senior ECB official to comment on cryptocurrencies in recent days.

The central bank’s vice president, Vitor Constancio, made headlines last week when he stated that cryptocurrencies were a purely speculative asset, and compared them to “tulip mania” – the 17th century trading bubble experienced in the Netherlands. Constancio stated that the ECB doesn’t see the technology as a “threat to central bank policy.”

And off it went:

I do find it amusing that the governor of the shakiest reserve currency in the world can’t regulate against a fundamental threat to its very existence. Something will be done in due course.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.