Yves Mersch, director and board member of the European Central Bank (ECB), declared recently that the banks should not mix the cryptocurrencies with fiat money.
The director of ECB stated that online tokens issued by private companies do not qualify as money, according to Reuters. He also called for massive regulations for the token issuers, exchanges and all the banks that are dealing with digital currencies.
“Due to the high volatility of VCs [virtual currencies] it might seem appropriate to require any VC trading to be backed by adequate levels of capital, and segregated from other trading and investment activities,” was quoted Mersch by Reuters.
It is known that Mersch’s stance on cryptocurrencies is very aggressive since, in January, he warned all the financial institutions about the risks that the crypto market could bring. At that time he stated that the evolution of cryptocurrencies could put the banks in “extreme dangers.” However, he explained that for the moment with a global market cap circling at around $400 billion the crypto market is not a threat, just a niche pushed by hype.
Mersch went on this time and cautioned the financial institutions about the risks of using bitcoin and other cryptocurrencies as collateral for loans and trades settled at a clearinghouse.
“There’s a need to examine whether any VC activity carried out by FMIs (financial market infrastructures) should have to be ring-fenced,” added the director of ECB.
Last year he urged the banks to remain competitive against the blockchain instant payments, and he advised the commercial banks to add the instant payment method.
Since its sharp movements, bitcoin started to become either a tool of implementation for some banks or a scarecrow for others. While Europe is struggling to find a way in which it could accept bitcoin on the traditional market, many financial services providers from the US have started offering bitcoin services for quite some time. The most recent announcement comes from Goldman Sachs.
On the other hand, Europe seems to be more interested in the blockchain technology. The London-based bank HSBC just announced that it has completed the first transactions between two banks with the help of the blockchain technology.