In a recent report by the ECB Crypto-Assets Task Force, the central bank outlines the analysis it has performed on the cryptocurrency market and its’ effects on global financing.
In essence, the report details that crypto-assets are not posing a direct threat to the current financial market, as the regulations that are already in place provide adequate monitoring. However, the ECB believes that all cryptocurrencies, and specifically Bitcoin, should not leave the radar of regulatory bodies, as constant monitoring is the only way to prevent market disruptions. The report explicitly states that:
The sector nevertheless requires continuous careful monitoring since crypto-assets are dynamic and linkages with the wider financial sector may increase to more significant levels in the future.
The main concerns of the central bank are that crypto-assets provide an opportunity for anonymous participation in illegal activities of all sorts. While the policies already in place, mainly anti-money laundering (AML) provisions, are performing according to expectations, the ECB believes that there still isn’t a concise regulatory framework when it comes to cryptocurrencies.
The main obstacle for such a framework to be created is the variety of local legislation in the EU, which makes the creation of unified regulations harder.
In terms of potential, the ECB believes that stablecoins have better prospects than crypto-assets like Bitcoin. According to Francois Villeroy de Galhau, an ECB policymaker, the central bank has more faith in stablecoins and not Bitcoin.
On the other hand, ECB President Mario Draghi completely disregarded the idea that the central bank will start issuing central bank-backed digital currency (CBDC).