Cryptocurrencies like bitcoin and the banks and financial firms that trade them need to be more closely regulated, a top European Central Bank (ECB) policymaker said on Thursday.
“Any virtual currency business of credit institutions needs to be rigorously supervised to ensure that risks emerging from such activities are contained,” ECB Executive Board member Yves Mersch said at an event in London, Reuters reports.
Mersch said proper protocols are needed to meet anti-money laundering and counter terrorist financing regulations.
“Furthermore, given the risks posed by leverage, credit institutions should not accept virtual currencies as collateral (by banks),” he added.
Mersch is the latest of a slew of global policymakers to speak out against digital currencies after their meteoric rise last year, Reuters noted.
Bitcoin, the top crypto asset, rose more than 1,000 percent in 2017. This year, however, the threat of regulatory clampdowns has caused it to tumble about 50 percent.
The market bubble of virtual currencies is deflating but central banks should still pay attention as the innovation may be here to stay even if early market leaders die out, Mersch said on Thursday.
“Virtual currencies are not money, nor will they be for the foreseeable future,” he said. “Their market share is still small and their ties to the real economy are still limited.”
“But this can be subject to change. Regulators and legislators on all levels should therefore urgently pay close attention to mitigating the potential risks that could stem from growing virtual currency business,” he added.
– Contact us at [email protected]