Coindesk reports that in a paper published 17th May, “the ECB said the combined value of crypto-assets is small relative to the financial system, and “linkages” to the financial sector are still limited. Further, there are banks in the EU that do not appear to have “systemically relevant” holdings of crypto-assets.”
The ECB also stated that cryptocurrencies for not perform the same function as ‘money’, adding that as a “very low” number of merchants currently allow buying of goods and services with bitcoin, and there is no “tangible impact on the real economy” or on monetary policy.
In one part it said: “The high price volatility of crypto-assets, the absence of central bank backing and the limited acceptance among merchants prevent crypto-assets from being currently used as substitutes for cash and deposits, as well as making it very difficult for crypto-assets to fulfill the characteristics of a monetary asset in the near future.”
It does appear to look favorably on stablecoins, saying, “cryptos could become less volatile if they were collateralised by central bank reserves.” However, it still raises some issues: “Such collateralisation could result in additional demand for central bank reserves, which could have implications for monetary policy and its implementation.”
The ECB is not in favor of issuing a central bank digital currency (CBDC) but is in favor of exploring an evolving digital economy. It also pointed out that digital assets do not come under current EU payment services regulations and thus “can hardly enter EU financial market infrastructures (FMIs).”
The paper says: “Crypto-assets cannot be used to conduct money settlements in systemically important FMIs. To the extent that they do not qualify as securities, central securities depositories (CSDs) cannot undertake settlement of crypto-assets. Even if crypto-assets-based products were to be cleared by central counterparties (CCPs), these would need to be authorized and to satisfy existing regulatory requirements, albeit at additional costs and with no clear benefits to EU CCPs.”
“We will not be seeing a digital version of the Euro any time soon” - Mario Draghi, head of the ECB said.