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ECB President calls for monitoring of increase in usage of digital currencies

The European Union plans to continue keeping a close watch on virtual currency schemes (VCS), including their traded volumes and exchange rate dynamics, the president of the European Central Bank (ECB) said recently.

In a recent letter addressed to the members of the European parliament, Mario Draghi called for the monitoring of the increase in usage of digital currencies such as bitcoin.

Draghi pointed out the analyses put forth in reports published by the ECB in 2012 and 2015 which discussed the existing differences between VCS and the traditional monetary systems of electronic payment. The key takeaways of the reports are:

  • Digital currencies do not currently pose a threat to financial stability, due to their limited connection to the real economy, the low volumes issued and traded, and the lack of wide user acceptance.
  • They do not pose a risk to price stability, provided that their issuance volumes continue to be stable and their usage low.
  • Build-up of risks stemming from VCS could materialise in the future and in such a case, a more direct regulatory response may be required from a financial stability perspective.

With regard to the last point, Draghi emphasized that a regulatory response is likely to be more effective when coordinated at the international level. Moreover, as players of the digital currency industry may be conducting their activities globally, he said that “a patchwork of inconsistent national regulatory responses to financial stability concerns” may not be well suited to address the associated risks adequately.

“An increase in the usage of VCS is conceivable. It is thus important to monitor the take-up of VCS from a financial stability perspective. Transparency on the number, structure and scope of VCS is key in this regard. The Eurosystem therefore intends to continue monitoring the volumes traded and exchange rate dynamics of the most important VCS, as well as their links to the “traditional” financial sector”, he concluded.

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