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Feb 8, 2018
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Cryptocurrencies experienced a rapid surge during the last weeks of 2017. Since then, the market has lost around 60% of its value. But according to Mario Draghi, president of the European Central Bank (ECB), financial Institutions in the European Union may start holding positions in Bitcoin. Banks could be interested in investing in Bitcoin and cryptocurrencies after the gains that they had during the last year.
EU Financial Institutions Can Hold Positions in Bitcoin
The president of the European Central Bank, Mario Draghi, said in front of the European Parliament that financial institutions could hold positions in Bitcoin. He explained that the increased interest in cryptocurrencies may be traduced in banks investing in cryptocurrencies.
European Central Bank – ECB
Mr Draghi commented about that:
“However, recent developments, such as the listing of Bitcoin futures contracts by US exchanges, could lead European banks too to hold positions in Bitcoin, and therefore we will certainly look at that.”
In December the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME), started to offer bitcoin futures. This situation has increased the interest of financial institutions of being pat of this market. But this does not mean that banks and other institutions will hold Bitcoins. That means that they will hold financial positions of Bitcoin, i.e. Bitcoin futures contracts.
Mario Draghi has warned that cryptocurrencies are very risky investments and that institutions may not be benefited by holding these positions. Additionally, he added that they will closely follow them in order to identify potential risks.
“However, we should understand that Bitcoin and other digital currencies are in the unregulated space and should be regarded as very risky assets. Virtual currencies are subject to high volatility and their prices are entirely speculative,” he commented. “Banks should measure the risk of any holdings of digital currencies in their portfolio accordingly.”
“Right now, digital currencies are not subject to a specific supervisory approach. Work is under way in the Single Supervisory Mechanism to identify potential prudential risks that these digital assets could pose to supervised institutions,” he finished.
Bitcoin Regulations ECB
Between November and December this year, the G-20 summit will be held in Argentina. Several bankers and financial officials have commented that Bitcoin regulations should be an important topic to discuss.
Japan has proposed a Bitcoin debate at the Summit in Buenos Aires. Taro Aso, the Japanese Finance Minister, said that bitcoin is not yet a credible currency. The Finance Ministers of France and Germany have also called for a proper debate about Bitcoin and cryptocurrency regulations.
“There is no fixed definition on whether it is a currency or not,” commented Taro Aso. “It has not yet been proven to be credible enough to become a currency, so I need to watch for a little while more.”
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