FRANKFURT: The European Central Bank (ECB) has woken up to the risks digital currencies can pose to policymakers’ bread-and-butter business: The economy.
“If you increasingly have bridges between the virtual world and the real world and then there is a collapse in this virtual world, it could drain liquidity from the real world,” executive board member Yves Mersch said in an interview in Frankfurt. “This then becomes a concern for the central bank.”
Until recently, policymakers dismissed cryptocurrencies as a speculative experiment. That changed when investors piled into bitcoin and its peers towards the end of last year, creating more than US$684 billion (RM2.68 trillion) in paper wealth in just three months, before prices tumbled in 2018. Officials are investigating whether and how they can control a new asset class that’s captured the imagination of retail investors and attracted interest from financial institutions.
“We need more information,” Mersch said. “For me, one obligation would already be to force the unregulated platforms to report transactions in a harmonised way to repositories so that we would have access to information — also in order to create a better response.”
Germany and France are leading a push among the world’s biggest economies to regulate cryptocurrencies, and Mersch’s ECB colleague Benoit Coeure said last month that he had expected the topic to feature prominently during a Group of 20 meeting in Argentina in March.
Agustin Carstens used his first major speech as head of the Bank for International Settlements this week to argue that there is a “strong case” for authorities to rein in digital currencies to ensure the functioning of payment systems and safeguard the “real value” of money.
“You won’t be surprised to know that we at the ECB are fully in line with his views and we have similar worries, or similar endeavors we are working on,” Mersch said. — Bloomberg