European Central Bank Board Member Says Crypto Mining Should Be Segregated by Banks

European Central Bank on Bitcoin

Last May 14th, European Central Bank (ECB) board member, Yves Mersch remarked that banks should “segregate” their dealings in cryptocurrencies from other activities, Reuters reported.

Reuters quotes Mersch as raising some concern on the high volatility of crypto markets, emphasizing that digital tokens “do not qualify as money,” and said that their issuers, as well as dealers, exchanges, banks, or clearinghouses, should be regulated.

Euro zone banks, which are supervised by the ECB, have so far avoided cryptocurrencies but U.S. giant Goldman Sachs has announced it would open a Bitcoin trading operation this year.

Mersch was also of the opinion that the market was so far too small to endanger financial stability with a $432 billion capitalization at its peak in early 2018, which is incorrect as peak capitalization reached $800 billion – before a sharp fall in the price of Bitcoin.

Mersch also cautioned that this could change and virtual currencies could pose a risk particularly if they were used as collateral for bank loans or for settling trades at a clearinghouse.

Mersch was quoted as saying that “There’s a need to examine whether any VC activity carried out by FMIs (financial market infrastructures) should have to be ring-fenced.”

Yves Mersch has been a longtime critic of the increasing interconnection of the traditional financial sector with the cryptocurrency space, having said that cryptocurrencies pose a risk of “contagion and contamination of the existing financial system” in February this year.

While being in opposition to crypto, the ECB has however championed blockchain’s potential for transforming securities settlements, against the backdrop of the European Commission’s Blockchain Observatory, which aims at “uniting” the European economy around the technology.

Related Cryptocurrency News

Leave a Comment