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  • The European Central Bank regards crypto assets as economic advancement.
  • The ECB sees great potential in stablecoins.

The European Central Bank (ECB) has made it clear that it does not regard cryptocurrencies as a threat to financial stability in Europe. The Central Bank has highlighted the importance of crypto assets on economic advancement and monetary policies in the region in a recently released paper called “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures.”

The bank declared that the combined value of crypto assets is way smaller in comparison to the mainstream economy. Only a few merchants accept digital currency as payments because of its volatile nature. The ECB explained:  

“The high price volatility of crypto-assets, the absence of central bank backing and the limited acceptance among merchants prevent crypto-assets from being currently used as substitutes for cash and deposits, as well as making it very difficult for crypto-assets to fulfill the characteristics of a monetary asset in the near future.”

Regarding the decentralized nature of cryptocurrencies, the bank said:

“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 Central bank believes that stablecoins have great potential since they are less volatile and pegged to physical assets. They are monitoring the development of these assets.