European Central Bank (ECB) President Mario Draghi has claimed that cryptocurrencies are assets and not currencies when recently questioned about his stance on Bitcoin.
Draghi said: “Bitcoins or anything like that are not really currencies, they are assets. A euro is a euro – today, tomorrow, in a month, it’s always a euro.”
— European Central Bank (@ecb) May 8, 2019
The ECB buys assets
The ECB recently made headlines for saying that it “creates money to buy assets”. Draghi also said that both he and the ECB are “behind the euro”. Could this mean that the ECB may have Bitcoin or other cryptocurrencies on its shopping list for future asset acquisitions to aid its balance sheet?
Draghi went on to ask, “Who is behind the cryptocurrencies?”, drawing the conclusion soon after that they are just “very, very risky assets, the value of which oscillates wildly”.
— European Central Bank (@ecb) March 12, 2019
No risk to fiat
Draghi does not believe that cryptocurrencies pose a significant threat to existing fiat-based economies. He said: “At this point in time, they are not significant enough in their entity that they could affect our economies in a macro way.”
He believes they are just speculative assets that perhaps need regulation. Today, it’s estimated that more than 50 million people hold cryptocurrencies, and many millions trade them each day. At the moment, the overall impact of cryptocurrency on real-world economies has so far been limited.
Draghi clarified that the ECB currently has no role in the crypto space and that the responsibility of regulating cryptocurrencies mainly falls on consumer protection agencies.
He added: “We tend to consider them as speculative assets, highly risky, but as far as the rest is concerned, it’s not really something that pertains to the central bank – the task of monitoring and regulating. It’s more, I would say, something that falls within the consumer protection competence, where you want to make sure that people who buy into these assets know what they’re doing and are aware of the risks they run.”
A future for the asset in Europe?
It is already well known that since the end of 2017, US-based regulator the CFTC has approved the trading of two Bitcoin-backed futures products under CME and CBOE-regulated exchanges. We also know that a third major institution – Bakkt (backed by the NYSE) – has also released its plans for its own Bitcoin-backed futures product that is due to launch in 2019.
At the moment, we have yet to see a comparable product launch in Europe, but the recent news of Fidelity Investment’s entry into the crypto space and the firm’s recruitment for staff to manage custody operations for digital assets at an office in Dublin may point towards a future for the decentralised asset in Europe.
Time will tell whether Draghi’s comments can open the door to consumer regulation in line with other ‘non-currency’ assets in Europe. Given the momentum of the industry globally, I’m sure this won’t be the last occurrence of an ECB chief commenting on the project’s ever-changing regulatory landscape and retail investment demand.
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