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Central Banks Are Considering Cryptocurrency Regulations: ECB Council Member

Last Updated March 4, 2021 5:01 PM
Francisco Memoria
Last Updated March 4, 2021 5:01 PM

Ewald Nowotny, the current president and governor of Austria’s central bank, the National Bank of Austria, and a member of the European Central Bank’s governing council, recently stated  that central bankers and legislators are eyeing cryptocurrency regulations, while speaking at a conference in Florence, Italy.

Nowotny stated:

“We’re asking ourselves if legislators or central banks should intervene, as happened in China where they banned (the use of cryptocurrencies) because they consider them fraudulent.”

The ECB council member’s comments referred to China’s ban on Initial Coin Offerings (ICOs) and cryptocurrency trading in the country, which even forced exchanges to shut down. As a result, over-the-counter trading has arisen as a popular alternative. China’s move aimed to limit financial risks surrounding cryptocurrency markets, and was partly motivated by their incredible growth this year.

However, the cryptocurrency ecosystem’s growth seemingly doesn’t affect Nowotny, who downplayed the potential risk bitcoin and other cryptocurrencies may represent for the wider financial system, as he stated the market “is not so large” and, as such, “cannot create financial instability.”

Over the last few months bitcoin’s value has been surging, so much so it recently hit a new all-time high above $8,100, and the cryptocurrency’s market cap hit $134 billion. It’s hard to tell how high bitcoin will go, as in the beginning of the year it wasn’t even at $1,000 per coin.

Nowotny further added that investors need to understand the product, as “it is like buying shares on the bourse [stock market]… people investing in this product can suffer losses and if that happens, they simply have to accept it.” As covered by CCN.com, this isn’t the first time the central bank governor dismisses cryptocurrencies.

Earlier this year, in an interview with a regional newspaper, Nowotny stated that bitcoin isn’t a currency because of its instability, while pointing out the central bank didn’t prohibit cryptocurrencies. At the time, he did point out investors should be aware of what they’re getting into, as in the past “there have always been cases where such things have burst.”

The ECB Council Member’s comments are motivated by the absence of governmental control and oversight, which make consumer education and protection tricky. UBS’s investment chief, Mark Haefele, stated that the cryptocurrency ecosystem’s lack of government oversight presents investors “unquantifiable risk,” and as such won’t be adding them to UBS Group AG’s portfolio.

Featured image from Shutterstock.