ECB Board Member Suggests Banks to Segregate Crypto Trades
May 16, 2018 1:59 pm
Yves Mersch from European Central Bank asks Banks to Separate Crypto Dealings from other Activities
According to Yves Mersch, the board member of European Central Bank (ECB), the banks should ‘segregate’ their trading in cryptocurrencies from other activities, as reported by Reuters.
Reuters reported that Mersch raised concerns about the high uncertainty of crypto markets, highlighting that digital tokens “do not qualify as money,” and that their issuers, as well as dealers, exchanges, banks, or clearing houses, should be governed.
Mersch also said that even at its peak market capitalization in January 2018 – which Mersch mistakenly reports as $432 bln rather than the actual $800 bln – the crypto market is still too petite to endanger financial security. He, however, noted that if cryptocurrencies were to be used as a warrant for bank loans or for settling trades at clearing houses, there would be an argument for such activities were “ring-fenced” from other dealings and expenses.
Reuters also notes, the European banks managed by ECB are not currently dealing in crypto. Recently, investment banking company Goldman Sachs reported that it would utilize its own money to trade bitcoin futures on behalf of its clients. The reports said that exact launch date of the new trading operation is not yet decided and the move came after the bank’s board of directors signed off on the initiative.
ECB’s Yves Mersch has been an influential critic of the growing interconnection of the traditional financial sector with the cryptocurrency space, saying that cryptocurrencies pose a risk of “contamination and corruption of the existing financial system” in February this year.
Mersch’s concerns that are shared by others such as the Bank of International Settlements’ (BIS) Agustín Carstens – the ECB’s Chair of the Supervisory Board Daniele Nouy told CNBC in February that in future, the involvement of the ECB in cryptocurrency regulation was likely to be “very, very low.”
In March, ECB and BIS stated Bitcoin, as well as central bank-issued digital currencies (CBDCs), saying they are “not the answer to the cashless economy.”
ECB has however advocated blockchain’s capability for changing securities settlements, against the backdrop of the European Commission’s Blockchain Observatory, which intends at “uniting” the European economy around the technology.