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The president of the European Central Bank (ECB) has issued a statement in which he addresses the impact of digital currencies within the financial economy.

In a letter addressed to the members of the European Parliament last week, Mario Draghi mentions the Committee on Economic and Monetary Affairs hearing where he discussed the relevance of financial innovation for the ECB in May.

At the time, he stated that the bank was closely monitoring the blockchain within the payments system to ensure that no risks could fragment the market. Yet, while the ECB has appeared open to the distributed ledger in the past, it’s not so favorable toward bitcoin. So much so, that the central bank once said that it wanted tighter controls on the digital currency and that it didn’t want them labeled as currencies or money.

Now, though, this latest development from the ECB builds on its position regarding digital currencies given the fact that the market capitalization has increased in 2017. And yet despite this, the bank thinks they have presented little impact on the economy.

Draghi wrote:


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… there is no evidence to suggest that the connection of VCS [virtual currency schemes] to the real economy has strengthened significantly.

He adds, though, that there could be a ‘build-up of risks’ coming from digital currencies in the future, in which case a ‘direct regulatory response’ would be required ‘from a financial stability perspective.’

Moreover, such regulatory response is likely to be more effective if it is coordinated at the international level.

With a rise in the use of digital currencies the ECB believes that a continued increase is conceivable. As such the bank will continue to  monitor the situation to determine the volumes traded, the most important digital currencies and ‘their links to the “traditional” financial sector.’

Since the beginning of 2017, bitcoin has risen from $1,000 to currently trade at $2,770. Whereas ethereum started the year at $8 and is now $227, according to CoinMarketCap. With news of BIP 91 locking in recently, trader confidence has returned, which has boosted trading prices back up.

Featured image from Shutterstock.

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Posted by Rebecca Campbell