The European Central Bank (ECB) once again gave the crypto community a cold wash. In its May report, the ECB stated that digital assets make zero impact on the real economy.
The European Central Bank (ECB) once again gave the crypto community a cold wash. In its May report, the ECB stated that digital assets make zero impact on the real economy. Moreover, the paper says that cryptocurrencies have no implications on monetary policies.
The ECB delves into the potential effect on monetary policy and economic developments caused by digital currencies. The report goes by the name “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures.”
ECB’s harsh statements are based around the fact that cryptocurrencies do not act as a credible substitute for deposits and cash. Any possible implications may occur should digital assets start functioning as money. Not only that but cryptocurrencies suffer from mere adoption. An extremely small percentage of merchants and retailers worldwide use them as a legitimate payment method. Put simply, consumers are having a hard time exchanging crypto for products and services. On the top of that, price volatility does not make things any simpler.
Touching on the matter of stablecoins, the European Central Bank used quite a milder tone. In fact, the ECB said it monitors stablecoin projects regardless of whether they are pegged to fiat currencies, physical assets, or stabilized by an algorithm. Going a step further, the ECB hinted that if collateralized by central bank reserves, stablecoins could become even less volatile.
EU’s Central Bank finally concludes that “the absence of any specific institution (such as a central bank or monetary authority) protecting the value of crypto-assets hinders their use as a form of money, since their volatility: a) prevents their use as a store of value; b) discourages their use as a means of payment; and c) makes it difficult to use them as a unit of account.”
The president of the European Central Bank Mario Draghi made a statement earlier in May when he said that cryptocurrencies are still too insignificant to affect “our economies in a macro”.
“Cryptocurrencies or bitcoins, or anything like that, are not really currencies — they are assets. A euro is a euro — today, tomorrow, in a month — it’s always a euro. And the ECB is behind the euro. Who is behind the cryptocurrencies? So they are very, very risky assets,” Draghi further added.