Mario Draghi has said that the European Central Bank (ECB) is closely monitoring distributed ledgers such as the blockchain within the payment systems so as to ensure no risks occur that could fragment the market.
Speaking at the hearing of the Committee on Economic and Monetary Affairs of the European Parliament, Draghi said that the most active field of fintech innovation, which might affect how payments are processed could be seen with the blockchain.
Given the rapid pace of development in this field, there is a need to constantly monitor and assess potential new or more pronounced risks resulting from the application of new technology such as DLTs to payment, clearing and settlement infrastructures in particular. One such possible risk is an increase in market fragmentation if different DLT approaches were to become firmly established in parallel in different member states.
The ECB and the Blockchain
This isn’t the first time that the ECB has spoken out about Bitcoin’s distributed ledger.
Just last month, the central bank reaffirmed that it needed to make sure that it follows through on initiatives to ensure regulations do not undermine the development of the blockchain. According to the report, the bank noted that it had due cause to support efficient payment and settlement systems within the Eurosystem.
However, despite, what appears to be a cautious approach from Draghi during his recent speech about the technology, the bank has been keen to embrace the blockchain in the past.
Last February, it was reported that the ECB was open to the blockchain and was taking a closer look into the technology. By doing so, it could explore its potential and the services it could provide to other central banks in Europe.
Not a Fan of Bitcoin
And yet, while the ECB is demonstrating an embracive stance toward the blockchain, it doesn’t appear to be as open toward Bitcoin.
In October, the central bank stated that it doesn’t qualify Bitcoin as a currency and went so far as to propose a directive of the European Parliament and of the Council stating that digital currencies should not be defined as legal currencies or money.
Of course, in a slight reversal, while the ECB is concerned about the volatility linked to digital currencies such as Bitcoin, a report published by the bank found that virtual currencies don’t pose an immediate risk to banks.
European Central Bank image from Shutterstock.