German central bank considers cryptocurrency ‘not a threat’
A month after the head of Deutsche Bundesbank, Germany’s central bank, provided a warning about stablecoins, another executive within the bank has issued a statement that cryptocurrencies pose no threat to the financial security of the country and its financial institutions. This according to a report published on July 9.
Speaking before the European Parliament, Burkhard Balz, an executive with the Deutsche Bundesbank, appeared to contradict the head of Germany’s central bank. “Crypto-tokens currently do not pose a risk to monetary or financial stability.” Furthermore, he also noted that “gaps may occur where they fall outside the scope of regulators’ authority or where there is an absence of international standards.”
However, he did add that additional scrutiny should be considered as the popularity of digital assets is rapidly increasing. Balz discussed how new technologies, such as artificial intelligence (AI), cloud services, and distributed ledger technology, could become an integral part in transforming the banking industry. He remarked:
“We are not talking about ‘evolution,’ about banking adapting to the wants and needs of a digital generation—we are talking about a true “disruption” that may change the financial sector for good.”
Balz’s comments come a month after Jens Weidmann explained that new stablecoins could actually undermine banks. He explained that if these coins are widely used “they would almost certainly become systemic by nature, not only because of their operational risks but also in a more fundamental way: they could undermine the deposit-taking of banks and their business models.” He added, “This might disrupt transaction banking and financial market intermediation.”
Weidmann’s comments come at a time of growing concern among banking executives. With companies like Facebook developing their own cryptocurrency which could provide financial services to persons without a bank account, many European central bankers are declaring that their agency has oversight when it comes to digital currencies. The justification is to ensure that money-laundering does not occur using these digital assets.
As Mark Carney, governor for the Bank of England, puts it, “It has to be safe, or it’s not going to happen.”
However, the executive board at the European Central Bank is recognizing that digital coins such as Libra are inevitable. This prompted board member Thomas Moser, a member of the Swiss National Bank’s governing board, to explain that it is time to start accepting these currencies, as long as they are abiding by governing regulations.
“Overall I think it’s an interesting development and I’m pretty relaxed about it. […] They have clearly indicated that they are willing to play according to the rules, they have been contacting the regulators,” Moser said.
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