ECB alarm for cryptocurrencies

By Leonidas Stergiou

The ECB is sounding the alarm about the rapid spread of cryptocurrencies in the Eurozone to the extent that they now threaten the financial stability of the system in the Financial Stability Report, which will be published in its entirety tomorrow.

According to the report, the direct and indirect exposure of the wider financial sector in the Eurozone to cryptocurrencies is estimated at 1.3 trillion. euro. This size, the ECB says, is still manageable in the event of a collapse in prices. But it will not be soon, due to the growing demand and investment rate even from large institutional investors. He even makes special reference to Germany, which last year allowed institutional investors to keep cryptocurrencies up to 20% of their assets.

Measures to be taken immediately

The ECB calls on the European Commission to speed up the MiCA Directive on the regulation of cryptocurrencies in Europe, which apparently will not be completed by the end of the year, which means that it will apply from 2024. For this reason This calls on the relevant supervisory authorities to take immediate action to regulate and regulate sub-sectors, such as investment funds, retail markets and cryptocurrencies investing in excess of 100 times more leverage.

Rapid growth

A Eurosystem study showed that after the large spread of cryptocurrencies in the pandemic year 2020, their capitalization increased sevenfold in 2021, reaching 2.5 trillion. euro. At the same time, the creation of new cryptocurrencies is rapid, with 16 widespread in the Eurozone, with Bitcoin and Ether dominating.