In the report dubbed “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures,” ECB looks into the potential impact of digital currencies on economic developments and monetary policy.
The bank specifically states that such implications could occur should cryptocurrencies became a credible substitute for cash and deposits, while currently they do not fulfil the functions of money.
The bank further says that cryptocurrencies’ deployment remains limited, with a small number of merchants ready to allow purchases of goods and services with digital currency, as the prices of digital assets remain volatile.
However, the ECB notes that the development of stablecoins — the value of which is pegged to physical assets, fiat currencies, or is stabilized by an algorithm — warrants continuous monitoring because they could become less volatile if collateralized by central bank reserves.
Finally, the bank argues that “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.”
Earlier in May, ECB president Mario Draghi said that cryptocurrencies “are not significant enough in their entity that they could affect our economies in a macro way,” adding:
“Cryptocurrencies or bitcoins, or anything like that, are not really currencies — they are assets. A euro is a euro — today, tomorrow, in a month — it’s always a euro. And the ECB is behind the euro. Who is behind the cryptocurrencies? So they are very, very risky assets.”
Echoing the ECB’s stance on stablecoins, the Bank of France's governor Francois Villeroy de Galhau said that the bank is closely watching stablecoins’ development. Villeroy made a point to distinguish stablecoins from cryptocurrency tokens at large, however, saying that stablecoins “are quite different from speculative assets like bitcoins, and more promising.”