The ECB updates its stance on crypto asset regulation and continues to promote the launch of a CBDC.
Bangs the Drum for CBDCs
The ECB, never known for being a friend or supporter of cryptocurrencies, will not have made many new fans after the latest news.
The European Central Bank published a statement on Wednesday, saying that "national frameworks governing crypto-assets diverge quite extensively." That is the reason why the ECB would take steps to regulate those assets.
Since EU countries have taken different approaches to harmonize rules following the EU Markets in Crypto-Assets (MiCA) regulation, the ECB wants to take charge by assessing licensing requests for crypto-related activities and services. That would imply checking firms' business models and governance and their compliance with AML rules.
The ECB also said that crypto will "remain an area of focus for European banking supervision in years to come."
Is a European CBDC coming?
Furthermore, though technically unrelated, the ECB published a working paper series discussing the relationship between CBDCs, monetary policy, and financial stability.
Titled "The economics of central bank digital currency," it concludes that CBDCs are "the only solution to guarantee a smooth continuation of the current monetary system." It also notes:
"There is no regulatory alternative that promises to eliminate the threat to the two‐layer monetary system. Since cash is only available in physical form, it is by construction not 'fit' for the digital age."
That will be music to the ears of crypto doubters. However, it will only antagonize the die-hard crypto proponents already skeptical of established institutions.
Although the paper admits that more research into privacy issues is needed, it dispelled doubts that CBDCs could interfere with credit creation.
It is the second paper in short succession arguing for a CBDC, following one on identifying the ultimate cross-border payment medium.
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