Η European Central Bank (ECB) has taken active action to curb the growing use of cryptocurrencies, which pose a serious risk to consumers. In this context, realizing the need to create e-media for conducting transactions, it is considering issuing digital euro. Final decisions are expected in autumn of 2023.
As the Governor of the Bank of Greece, Giannis Stournaras, points out to Nea, "Cryptocurrencies are speculative products with absolutely no social or transactional utility."
In addition, he notes that "through the algorithms used to make the identifications required for their operation, they consume huge amounts of energy, in contrast to the efforts of all states and governments today to save energy."
On the contrary, Mr. Stournaras emphasizes, "The digital currencies prepared by the central banks work completely differently, while meeting modern needs". This is because they combine the efficiency of an electronic payment instrument with the security of a central bank's money. At the same time, they help to address situations in which people no longer want to use cash.
Finally, they ensure the protection of personal data, which is a key priority for monetary authorities, as it helps to maintain confidence in payments.
On the other hand, the ECB considers that the increased use of cryptocurrencies poses significant risks associated with financial stability, the transmission of monetary policy, the fight against money laundering and terrorist financing, and the protection of investors and consumers.
To reduce the above risks, fixed cryptocurrencies based on the value of the collateral that accompany them have been issued in recent years. However, even these do not meet the necessary specifications. For example, if they do not provide full coverage, fire sales conditions may be created, which will have obvious negative effects on their owners.
But even if the coverage is complete, increased demand for fixed cryptocurrencies will increase demand for the assets that make up the hedge, leading to higher prices and lower returns. Thus, in an environment of negative returns, for certain assets that are classified as safe, the coverage will quickly be reduced to less than 100%.
In addition, fixed cryptocurrencies can not benefit from the institution of last resort lender, as it is doubtful whether in times of turmoil the "quasi" issuer has the ability and will to support the currency. Besides, in no case do they enjoy the privileges of the institution of the guarantee of deposits.
The European Council and the European Commission have stated that no global fixed cryptocurrency mechanism should be put in place in the European Union, at least until legal, regulatory and regulatory challenges are adequately identified and addressed.
The ECB, on the other hand, although it considers that new technologies can theoretically meet the conditions for enhancing transparency and accountability in financial services, considers it necessary to deal with them carefully, as they pose significant risks.
In particular, a recent report argues that fixed cryptocurrencies, for which very large technology companies have shown increased interest, require coordinated action to clarify their legal status and to address risks and concerns with due diligence.
Also, their operation, according to the Eurobank, must be subject to clear and proportionate regulatory and supervisory frameworks, which are based on data covering the full range of fixed cryptocurrencies.
This includes discussions on digital currencies by central banks, as well as improvements to payment systems to meet market and consumer expectations for fast, efficient and cost-effective payments - especially cross-border payments.
Source: CNN Greece