The head of the European Central Bank (ECB) believes his organization does not have jurisdiction to regulate cryptocurrencies, tempering calls for a bigger crackdown on the alternative asset class.
Banning Cryptos Not the ECB’s Job
In an #AskDraghi video series hosted by the ECB, President Mario Draghi said it’s not his responsibility to regulate the digital currency market.
“Many of you posted questions about whether the ECB is going to ban Bitcoins or it’s going to regulate Bitcoins,” Draghi said, as quoted by Reuters. “I have to say it’s not the ECB’s responsibility to do that.”
Unlike fiat currencies, which are backed by central banks, cryptos are not backed by anyone, he added.
Draghi was asked whether he would recommend buying bitcoin, in which he responded that the decision would need to be weighed carefully given the market’s wild fluctuations.
Last week, the head of the Bank for International Settlements Agustin Carstens argued for central banks to do more to rein in cryptocurrencies – a market he described as a “Ponzi scheme.”
Cryptocurrencies will be an important agenda item at next month’s Group of 20 meeting in Buenos Aires. Representatives from France and Germany are said to be working on a new framework for regulating the market. The framework is expected to be tabled at the meeting.
Support for Blockchain Grows
Like other government officials, Draghi praised developments in blockchain technology, which he described as “quite promising.” However, he cautioned that blockchain is not yet safe enough for use by the ECB or any other central bank.
“We’re very interested in this technology but it’s still not secure for central banking and therefore we need to look through it and investigate it more,” he said.
The ECB, like its counterparts in Japan, have been exploring distributed ledger technology to boost financial market infrastructure. The Bank of Canada has also been exploring blockchain to speed up the clearing and settlement of financial securities.
Members of the old guard – governments, banks and other traditional financial institutions – have been quick to embrace blockchain while simultaneously disavowing cryptocurrency. However, many have broaden their scope due to heightened demand from mainstream investors.
Back in December, Goldman Sachs announced it would launch a bitcoin trading desk by the middle of 2018, becoming the first major Wall Street firm to do so.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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