Cryptocurrencies Pose no Threat to the Economy, According to the European Central Bank

In a recently published report on digital assets, the European Central Bank, says, among others, crypto-assets do not currently pose an immediate threat to financial stability of the Euro area.

The report was prepared by the Internal Crypto-Assets Task Force (ICA-TF), established by the European Central Bank to monitor crypto-assets and analyze potential implications for monetary policy and the risks they may entail for the smooth functioning of market infrastructures and payments, as well as for the stability of the financial system.

The report is structured in five sections:

Section 1: Introduction;

Section 2: Discusses the ICA-TF characterization of crypto-assets;

Section 3: Presents an overview of crypto-assets market trends and the evolution of links with the financial system;

Section 4: Provides a risk assessment and gap analysis based on the current regulatory and oversight frameworks;

Section 5: Offers conclusions and the next steps in the analysis of crypto-assets

Some of the findings of the Task Force as published in the Report are:

Crypto-assets do not fulfil the functions of money and, at the current stage, neither do they entail a tangible impact on the real economy nor have significant implications for monetary policy.

Although this is by and large true, it may change very quickly soon. We were just greeted with the news that AT&T will be accepting crypto payments. We were also introduced earlier to a crypto payment processing startup Moon, which will let users spend crypto on e-commerce sites such as Amazon simply by connecting the Moon browser extension to exchange accounts like Coinbase.

In the current regulatory framework, crypto-assets can hardly enter EU financial market infrastructures (FMIs).

This is largely true as of today.

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.

If and when the linkage with the wider financial sector increases to more significant levels in the future, it is hoped that the ECB, will facilitate the development of digital assets and not hinder it.