So far, crypto-currencies like bitcoin have largely escaped regulation, but authorities in numerous countries are taking a closer look given the threat they could pose to financial systems given their volatility and the increasing size of the market
As the virtual assets are now bigger than the risky mortgage loans behind the 2007 global financial crisis and show signs of being a bubble, global regulation of crypto-currencies has been called on Monday by a senior official of the European Central Bank (ECB).
So far, crypto-currencies like bitcoin have largely escaped regulation, but authorities in numerous countries are taking a closer look given the threat they could pose to financial systems given their volatility and the increasing size of the market.
“We need to make coordinated efforts at the global level to bring crypto-assets into the regulatory purview,” said Fabio Panetta, a member of the ECB’s executive board, in a speech in New York.
“And we need to ensure that they are subject to standards in line with those applied to the financial system.”
His call echoes that of the Bank of England, which last month increased oversight to prevent crypto-currencies from becoming a risk to financial stability.
The crypto market is now larger than the $1.3 trillion (1.21 trillion euros) sub-prime mortgage market was when it melted down and triggered the global financial crisis in 2007, said Panetta.
Moreover, “it shows strikingly similar dynamics”, he warned.
Panetta said, “Crypto evangelists promise heaven on earth, using an illusory narrative of ever-rising crypto-asset prices to maintain inflows and thus the momentum fuelling the crypto bubble.”
He added, “Crypto-assets are bringing about instability and insecurity –- the exact opposite of what they promised.”
Panetta said, public demand for digital assets and instant payment systems is shown by the growth of crypto-currencies, and said the ECB is working on the development of a digital euro to satisfy that demand.
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