European Central Bank: Cryptocurrencies have no impact on the real economy

19 May, 2019
by Richard Allen
News
European Central Bank: Cryptocurrencies have no impact on the real economy

The European Central Bank (ECB) recently released a report in which they state cryptocurrencies have no implications on monetary policy or factor into the real economy.

Titled, “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures,” the ECB looked into the potential impact of cryptocurrencies on economic developments and monetary policy.

The report concludes that, at the moment, virtual currencies don’t fulfill the functions of money. Only once they become a credible substitute for cash can they have an impact on economic developments.

The report goes on, noting cryptocurrencies’ deployment remains limited with only a small number of merchants able to facilitate the purchase of goods and services with virtual currencies, as the volatility of the assets remains too high.

However, the ECB believes things can change with the development of stablecoins. Since their value is pegged to physical assets or stabilized by an algorithm, their prices are far less volatile and warrant further monitoring.

The ECB also notes that “the absence of any specific institution (such as central banks 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.”

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