ECB Calls Cryptocurrency ‘Inherently Unstable’ amid Grexit Irony (Op-Ed)

The European Central Bank releases a second report on digital currencies criticizing “stability” while struggling to bail out its failing members in a way which will guarantee future economic health and growth.

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ECB Calls Cryptocurrency ‘Inherently Unstable’ amid Grexit Irony (Op-Ed)

The European Central Bank releases a second report on digital currencies criticizing “stability” while struggling to bail out its failing members in a way which will guarantee future economic health and growth.

As the saying goes, “plus ça change…,” and this week’s report by the European Central Bank (ECB) terming digital currencies “inherently unstable” is likely to be viewed by more than usual as a particularly delicious case of banking sector irony.

The Eurozone’s struggle to contain the financial crises of Cyprus and now Greece, as well as the threat to larger economies such as Spain and Italy, certainly removes the sting from any concerted attempt at criticism of digital currency. Add to this the recent Reuters survey showing consensus regarding a Eurozone breakup fluctuating between 6% and 72% of experts over the course of just two years, and the contradictory nature of the ECB statements is immediately palpable.

“The new aid programme for the country does not seem to be convincing, rather a ‘Grexit’ is now bound to be a constant topic among investors for the months to come,” Sentix analyst Sebastian Wanke told Reuters.

The survey polled 980 financial figures, most from Germany, and returned the result that doubt surrounding Eurozone stability had risen to its highest in two years, even after the Greek settlement plan had been agreed.

The embattled ECB meanwhile, at odds with both Greece and Germany over the former’s recent crisis, did adopt an increasingly popular angle in banking literature on the relative promise held by blockchain technology – and it did not stop there.

As Greek finance minister, Yanis Varoufakis, ironically mentioned, digital currency could well act as the savior for cash-poor Eurozone states, and a year later the Bank could not overlook the intrinsic usefulness of the concept.

The ECB report states:

“Although [virtual currency systems] units are not denominated in euro, they do have the potential to have an impact on monetary policy and price stability, financial stability and the smooth operation of payment systems in the euro area.”

The implications of such remarks should not be overstated. A similar report by the Bank of England last week even resulted in its tweeting the value of “convincing stories” on Bitcoin with respect to “the future,” and UK Chancellor George Osborne echoing its findings. Nonetheless, given the history of Eurozone banking sector practice vis-à-vis Bitcoin specifically in the past, any ECB statements which are less critical are interesting in and of themselves.

An example of this is where the Bank highlights practical uses for digital currency and not just the underlying technology. The report continues:

 “…[T]here is major room for improvement, especially in [the remittance] field.”

It even goes as far as to say that virtual currency “could have the potential to offer a better service than traditional providers (banks, money remitters and informal remittance systems).”

Could this be another case of the more things change, the more things stay the same? Is there more a stake in this instance? Let us know in the comments below.

Meanwhile, the dichotomy between bank and business when it comes to cryptocurrency continues unabated, little influenced by banks’ literature. A survey commissioned by Hewlett Packard of US businesses indicates that 60% of 634 respondents are including the technology in their “long-term strategy,” Bitcoin Examiner reports, while 35% believed that virtual currencies would overtake paper ones more broadly within the next 10 years.

The survey can be accessed here.


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