ECB deems crypto assets are not a threat to the euro area

The financial stability of the euro area is not threatened by crypto assets, the European Central Bank (ECB) has written in its newest paper. According to the analysis, their value is still too small to influence the financial system. Moreover, their connection to the financial sector is still too minor to be influential. However, careful monitoring of the crypto asset stage is required since “linkages with the wider financial sector may increase to more significant levels in the future.”

At the moment, cryptocurrencies do not yet work as money and they do not have a large impact on the economy. Neither do they have “significant implications for monetary policy.” The report states, “[C]rypto-assets do not fulfil the functions of money, and neither do they entail a tangible impact on the real economy nor have significant implications for monetary policy. In principle, implications for monetary policy could materialise in the event that crypto-assets were to turn into a credible substitute for cash and deposits.”

There is currently a small number of retailers offering cryptocurrency payments.

The report states that due to current regulations, there is no space for crypto assets to enter EU financial market infrastructures (FMI) since systematically important FMIs do not accept their use in money settlements. Further, the report reads, "To the extent that they [crypto assets] do not qualify as securities, central securities depositories (CSDs) cannot undertake settlement of crypto-assets. Even if crypto-assets-based products were to be cleared by central counterparties (CCPs), these would need to be authorised and to satisfy existing regulatory requirements, albeit at additional costs and with no clear benefits to EU CCPs."