While major stock brokers are lining up to add bitcoin futures to their platforms, central bankers are apparently not too happy about it. A member of the European Central Bank (ECB) executive board has called the instruments a threat to the financial stability of the entire banking system.
Also Read: After Ripple’s Rise BTC Dominance Falls Below 40%
Major Threat to Financial Stability
In an interview with German financial daily Börsen-Zeitung, ECB director Yves Mersch sounded the alarm on financial institutions investing in bitcoin futures like those offered by the Cboe and CME. “There are now banks which hold positions in bitcoin. It is a matter for the supervisors to judge how big the risks are, he said. “What concerns me most, is when financial market infrastructures such as stock exchanges enter this business. That poses a major threat to financial stability.”
Regarding the systematic risks and his position on the central bank’s involvement, he explained: “If these transactions are kept separate from others, it’s a secondary matter who wins and who loses. However, if all the participants in these financial centers are jointly liable, that can create difficulties, for instance, for banks or the whole system. And if the banking system gets into trouble, there will again be demands for support from the ECB. I would say from the outset: we shouldn’t do this.”
Money Needs Trust, Blockchain is the Real Threat
The ECB director, who proposed just a month ago that commercial banks create digital cash to compete with the growing popularity of bitcoin, now claims that the cryptocurrency can’t become a real alternative to central bank money. “Money needs trust. Public currencies, for example the euro, have the backing of public institutions such as the ECB. Many of these currencies have no backing, nothing.”
As is common for bankers and bureaucrats to do today, he hyped ‘blockchain technology’ instead. “That’s a challenge we all have to face, especially banks. Each institution has to know that in the future financial intermediation will no longer be heaven-sent, but has to be fought for.”
Bitcoin trading itself is not at present an issue for monetary policy because “turnover is between €250 and €350 billion. The volume is therefore comparatively low.” Regarding the cryptocurrency’s massive 2017 price rally he added: “We are seeing speculative hype that might be a cause for concern. But of course individual investors are free to gamble. However, if something goes wrong, they should not come to us and say we should have outlawed it and protected them from themselves.”
VAT on Bitcoin Cult?
Bitcoin doesn’t appear to have many fans at the ECB beyond just Yves Mersch. At least two officials spoke out against the cryptocurrency and its users today on European media.
Ewald Nowotny, ECB governing council member and head of Austria’s central bank, called for new taxes and regulation on bitcoin in an interview with the German daily Sueddeutsche Zeitung. He said: “We need a value-added tax on bitcoin, since it’s not a currency. It can’t be allowed that we’ve just decided to stop printing 500-euro notes to fight money laundering, that we’ve slapped strict rules on every tiny savings club, and then have to watch people blithely laundering money around the globe with bitcoin. One ought to apply what the basic rule is in any other financial transaction: everyone involved should reveal their identity.”
Estonia central bank governor and ECB Governing Council member, Ardo Hansson, told the Estonian news paper Eesti Paevaleht that rationality has disappeared from the cryptocurrency sector. He thus concluded that the “cryptocurrency bubble is like a religious sect,” driven by emotions which will burst sooner or later.
What are the chances that the ECB will make a major move against bitcoin in 2018? Share your thoughts in the comments section below!
Images courtesy of Shutterstock.
Do you like to research and read about Bitcoin technology? Check out Bitcoin.com’s Wiki page for an in-depth look at Bitcoin’s innovative technology and interesting history.
The post Bitcoin Futures Are a Threat to Whole Banking System, Fears ECB Director appeared first on Bitcoin News.
