ECB: Bitcoin, Ether, Ripple and BCH are the “Most Important” in Usage & Business Model Diversity


In its latest report titled, “Crypto-Assets: Implications for financial stability, monetary policy, and payments and market infrastructures,” European Central Bank (ECB) takes on cryptocurrencies.

To start with, ECB points out that Bitcoin is the leader of the pack when it comes to market capitalization, user base, and popularity. It further mentions that despite losing its market share, it has recovered and currently stands at 54 percent.

“Next to bitcoin, ether, ripple and bitcoin cash are considered the most important in terms of usage, market capitalisation or business model diversity.”

Crypto-asset Development

Regarding the development, the key findings have been:

  • Financial investment vehicles like trusts, Exchange Traded Notes (ETNs) and Contracts for Difference (CFDs) have started to offer exposure to crypto-assets to European clients that are mainly found in the household sector with key markets in Belgium, Italy, and Germany in Q3, 2018.
  • Price growth of crypto-assets surpassed that of historical bubbles viz. Dot-com bubble, South sea bubble, Mississippi, and Tulip mania before the crash in early 2018.
  • An important share of bitcoin’s trading volume, an average of 10% of the total, is settled in euro.
  • The top 1,000 addresses (0.0018% of all active addresses) represent around 36% of all bitcoin holdings and the top 10,000 holds 58%, reports ECB in its report
  • Developments and activities like Bitcoin futures contracts and financial investment vehicles that track crypto-assets, may increase links to the traditional financial sector and the real economy.
  • Banks do not seem to have systemically-relevant holdings of crypto-assets while hedge funds and asset managers showing strong interest.
  • Initial coin offerings (ICOs), a largely unregulated way to raise capital collected about €19 billion in 2018.

Implications for Monetary Policy

  • At the current stage, crypto-assets do not fulfill the functions of money, and neither do they entail a tangible impact on the real economy nor have significant implications for monetary policy.
  • Since the size of the sector remains small and linkages to the wider financial system – let alone the real economy – remain limited, crypto-asset related developments have no direct implications for monetary policy at the present stage. At the same time, the dynamic nature of crypto assets, including the development of stablecoins, warrants continuous monitoring.
  • Clarifying the accounting treatment of crypto-assets could lead to a more conducive environment for such investments being created.
    “Regulation of crypto-asset gatekeepers could have an unintended impact on the market,” cautions ECB.

    It further states that still ECB continues to monitor the crypto-assets, and further raise awareness while developing preparedness for any adverse scenarios that too in cooperation with other relevant authorities.

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