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ECB Sounds Alarm Over Linkages Between Stablecoins and Conventional Financial Markets
The central bank said exotic market segments, such as crypto, remain subject to “speculative bouts of volatility.”
Updated May 11, 2023, 4:40 p.m. Published Nov 17, 2021, 12:10 p.m.
The search for higher yields amid rising inflation and falling interest rates has led investors to take greater risks, making a broad section of the market, including crypto, vulnerable to corrections, the European Central Bank (ECB) said.
- The ECB acknowledged that cryptocurrencies have grown in popularity and relevance, and said that the crypto markets are subject to “speculative bouts of volatility.”
- The increasing use of leverage by crypto investors can lead to “large, concentrated losses,” the central bank said in its bi-yearly financial stability review, which was released on Wednesday.
- The ECB also warned against the growing link between stablecoins, cryptocurrencies that are pegged to fiat currencies, and the traditional financial market.
- The central bank has been discussing the creation of a central bank digital currency (CBDC) since the start of this year, and in July said it decided to launch the investigation phase of a digital euro project that would last 24 months.
- Fabio Panetta, a member of ECB’s executive board, earlier this month laid out a detailed roadmap for CBDC inclusion.
Read more: ECB’s Panetta Says Digital Euro Should Expand Overall Payment Solutions
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Five Crypto Firms Win Initial Approvals as Trust Banks, Including Ripple, Circle, BitGo
The firms have obtained conditional approval from the Office of the Comptroller of the Currency to convert into national trust banks.
What to know:
- Crypto firms Circle, Ripple, Fidelity Digital Assets, BitGo and Paxos received conditional approval by the OCC to become federally chartered banks.
- The move sets up firms to follow in the footsteps of Anchorage Digital, the first to get a federal bank charter in the U.S.
- A slew of stablecoin issuers and crypto firms, including Coinbase, filed for federal oversight after GENIUS Act was written into law.
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