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The president of the European Central Bank (ECB) has issued remarks addressing the rising interest in cryptocurrencies as an asset class.
In a letter to members of the European parliament this week, Mario Draghi built on statements made during a May hearing, in which he first discussed financial innovation, including the "rapid pace of development" in digital ledger (DLT) and related technologies. At the time, he cautioned that care must be taken so that fintech, including blockchain and DLT, does not disrupt the financial system.
Published this week, the new letter builds on this commentary, addressing more directly the rise in cryptocurrency prices so far in 2017. Driven by big gains in bitcoin and ether, the value of the total supply of all cryptocurrencies is now $93bn, down slightly from an all-time high of $115bn earlier this year.
Still, in the face of this increase, Draghi used the opportunity to restate his belief that cryptocurrencies still have a limited impact on the financial system.
Draghi wrote:
"Although the market capitalisation of [virtual currency schemes] has increased since the publication of these reports, there is no evidence to suggest that the connection of VCS to the real economy has strengthened significantly."
Citing past research from the ECB, Draghi indicated he still believes there could be a "build-up of risks" due to the use of cryptocurrencies, which may necessitate an international regulatory response.
Still, for now, he said the ECB would likely take steps to continue to monitor the ecosystem, tracking the "number, structure and scope" of public blockchain tokens.
"An increase in the usage of [virtual currency schemes] is conceivable. It is thus important to monitor the take-up of VCS from a financial stability perspective," he said.
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