A new report from the European Central Bank (ECB) has found that crypto assets do not currently pose an immediate threat to the financial stability of the euro area.
The report, which evaluated the outcomes of the ECB’s Crypto Asset Task Force investigation into recent developments in the crypto assets market and unfolding links with financial markets and the economy, as well as “the potential impact of crypto-assets on monetary policy, payments and market infrastructures, and financial stability.”
Analysing the potential impact that crypto-assets – defined by the ECB report as “a new type of asset recorded in digital form and enabled by the use of cryptography that is not and does not represent a financial claim on, or a liability of, any identifiable entity” – the report confirmed that the ECB believes that such assets cannot be perceived as a danger to the Eurozone’s economic stability.
“Their combined value is small relative to the financial system, and their linkages with the financial sector are still limited. There are no indications so far that banks in the EU have systemically-relevant holdings of crypto-assets,” said the report’s analysis.
The ECB stated that as crypto assets do not perform the function of currency, they, at the present time, do not “entail a tangible impact on the real economy” or have a “significant implications” for monetary policy.
As crypto assets do not currently fall under the remit of European regulatory frameworks, they “can hardly enter EU financial market infrastructures (FMIs),” said the report.
In February this year, the chair of the European Securities and Markets Authority (ESMA), Steven Maijoor, called for objectivity and open mindedness from regulators in developing regulatory frameworks for crypto-assets and distributed ledger technology (DLT), while highlighting industry calls for the technology to deliver on its early promise.
“Crypto-assets and the underlying DLT command our attention because they are at the frontier of innovation,” Maijoor said during an event held by the Association for Financial Markets in Europe (AFME). “They therefore pose a challenge to firms, who seek to turn the promise of frontier technology into workable business models. Likewise, crypto-assets and DLT pose a challenge of regulators, because they are partly in unchartered territory.”