The European Central Bank has on its plans the possibility to restrict the use of cryptocurrencies in the Eurozone
The highest staff in the European Central Bank (ECB) is discussing the possibility of introducing tighter controls on the use of cryptocurrencies in the Eurozone, the Governor of the Austrian Central Bank and member of the Council of the ECB, Ewald Nowotny, said.
Nowotny had already expressed in the past that Cryptocurrencies, and particularly Bitcoin, are not a safe option to store value. “The Bitcoin does not own the main feature that makes a currency good, namely, stability”, he added.
The rising concerns on cryptocurrencies come after China’s and South Korea’s decision to ban ICOs in their territories. As Nowotny explained, the virtual currencies in China were used to avoid internal regulations regarding money movement, something that Europe does not experience and a subject that does not alarm the continent.
Nowotny statements appeared one week after the ECB’s president, Mario Draghi, commented on the topic saying that “it is not in the power of the ECB to regulate Bitcoin and other cryptocurrencies”. Draghi stated further that the ECB has not had an institutional discussion on the matter yet.
Draghi’s concerns on cryptocurrencies are focused on three main areas: the size of the market, the users’ acceptance and the impact on people’s daily life. “It is pre mature to consider them as a mean of payment. The main worry is the potential fragility and side risks”, he continued. It is important to remark that the ECB applies higher capital requirements to some fin-tech enterprises than to other financial institutions. It is in this way because they believe that the risks involved in such industries are higher than in the others.
Following this way of perceiving the fin-tech industry, is probable that the Bitcoin and cryptocurrency community would see some kind of regulation, but not as hard as the ones that the Asian countries mentioned before applied.
Bloomberg reported that Vítor Costâncio, ECB vice president, commented on the discussion saying that “Bitcoin is an instrument of speculation but certainly not a currency. We don’t see it as a threat to central banking or monetary policy”.
Estonia and Denmark issuing their own cryptocurrencies
Estonia and Denmark are the two countries that were planning to adopt some kind of cryptocurrencies. Estonia deeply analysed the possibility of issuing a new legal cryptocurrency named Estocoin, as the Managing Director at e-Residency posted in a blog.
Denmark was also analysing this possibility. As a cash-less country, the next step was to introduce their own cryptocurrency.
The ECB expressed their concerns and immediately fired back those proposals. The ECB and its authorities argued that the only legal currency in the Eurozone is the Euro, and countries do not have the right to issue any other currency (cryptocurrency or not), that would compete with the Euro. Even though, Denmark is not a member of the Eurozone but of the ERM-II mechanism which would allow Denmark in the future to be part of the Eurozone adopting the Euro.
This situation shows the position of the ECB regarding state-issued cryptocurrencies. If any other form of currency that is non-state issued would compete with the Euro, it is taken for granted that the ECB would not allow any different currency to operate in the Eurozone jurisdiction and would take the necessary measures to regulate it.
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