ECB Considering Legal Restrictions On Cryptocurrency
The European Central Bank (ECB) is currently discussing the possibility of implementing legal restrictions relating to cryptocurrencies, according to Ewald Nowotny, a member of the ECB’s governing council and the governor of the National Bank of Austria.
Nowotny, who has previously expressed reservations about the adoption of cryptocurrency, recently reiterated his stance that bitcoin “is not a currency,” citing its volatility and lack of oversight as well as the fact that its current valuation is largely the result of speculation.
In China, he said, the virtual currency has been used both as an instrument of capital flight and as a means to circumvent legal regulations. These concerns, exacerbated by price fluctuations that would be considered drastic for fiat currencies, have caught the attention of the ECB and prompted discussions around the introduction of laws to restrict the use of cryptocurrencies.
Nowotny’s statement comes about a week after ECB President Mario Draghi told the European Parliament that the bank lacks the authority to regulate or prohibit bitcoin and other digital currencies.
Also in September 2017, the ECB issued a report advising that distributed ledger technology (DLT) should be interoperable with non-DLT systems in order to be viable for real-world use cases. This position suggests an openness to at least partially embracing blockchain technology, the cryptographic protocol on which bitcoin and other virtual currencies are built.
On September 22, ECB Vice President Vítor Constâncio opined that because Bitcoin’s volatility prevents it from fulfilling the functions of a currency, it does not represent “a threat to central banking or monetary policy.” Around the same time, Germany’s central bank predicted that blockchain technology is unlikely to gain “widespread use in the field of individual and retail payments.”
Earlier that month, Draghi also remarked that no European Union member state could introduce its own currency, in response to a question about the possibility of Estonia premiering a state-backed cryptocurrency.