Today bitcoin is met with open arms by ordinary Joes who want to make fortunes quickly as well as by giant stockbrokers, who dream of adding its futures to their bases, whereas European Central Bank (ECB) officials seem quite incredulous towards the most prominent digital coin in the world.
Some of ECB governors see a devastating threat in bitcoin-based futures to the whole banking system, while others even call for immediate bitcoin’s regulation and tax over bitcoin transactions.
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A Nightmare For Financial System
Yves Mersch, who is an ECB director, is one of the bitcoin-skeptics. Answering questions of the Börsen-Zeitung’s journalist (interview was published on December 29, 2017), he expressed his considerable concern over futures, grounded on bitcoin, which were launched at giant exchanges CME and Cboe by the end of the last year.
In general, Mersch doesn’t seem to be happy with powerful financial institutions weighing into the crypto market. He also said that lots of banks nowadays hold positions in this cryptocurrency. But how much bitcoin can jeopardize the whole situation, is the business of supervisors.
“What concerns me most, is when financial market infrastructures such as stock exchanges enter this business. That poses a major threat to financial stability,” took alarm Mersch.
Joint Liability
The ECB director also emphasized that it is not that important if bitcoin operations are conducted apart from the others. However, in his words, if all those, who take part in the activities, are jointly responsible, then problems may occur. In particular, separate banks or the entire financial system will face difficulties. Therefore, Mersch believes, these participants will directly or indirectly ask ECB for help. He also called for not “doing this” from the very beginning.
Also, Mersch claimed that bitcoin doesn’t have any back up to become indeed trustworthy as fiat money does. For example, euro as a public currency is supported by such establishments as ECB, but bitcoin can’t show off with such a backing. For this reason, the ECB director argues, this digital coin cannot become a valid option to the fiat money.
Views Changed?
Interestingly, around a month ago Mersch himself offered to develop digital money to rival with the fast-forwarding bitcoin’s adoption. The proposal was related to only commercial banks. Currently, he considers blockchain to be a floorer to banks, so all the business establishments will have to fight for their existence in the future.
Nevertheless, ECB director remains quite calm when it comes to piling into bitcoin by individuals, what he calls “gambling”. Mersch believes that bitcoin’s price swings that we saw in December 2017, were a risky craze, so he would like to be responsible for neither protecting nor regulating the crypto market for individual investors.
Call For Tax and Bitcoin Regulation
Meanwhile, Ewald Nowotny, who is an ECB governing council member and the leader of Austria's central bank Oesterreichische Nationalbank, is not friendly towards bitcoin either.
Answering questions of the Sueddeutsche Zeitung’s journalist, he called for the control and taxation of bitcoin as well as precise identification of all people, who take part in this kind of financial transactions. According to his words, there should be value-added tax (VAT) for bitcoin as long as it’s not a currency. He also expressed his concern over money laundering:
“It can’t be allowed that we’ve just decided to stop printing 500-euro notes to fight money laundering, that we’ve slapped strict rules on every tiny savings club, and then have to watch people blithely laundering money around the globe with bitcoin,” warned Nowotny.
Bubble Talks
A few days before Nowotny's interview, Benoît Cœuré, who is an ECB executive board member, claimed that bitcoin is in a financial bubble. In comments to the Beijing-based media Caixin Global, he named his concerns over bitcoin, and those are money laundering and evasion of taxes. Cœuré emphasized that there is a risk of massive capital casualties, primarily, due to the bitcoin frenzy. And even though he doesn’t see bitcoin as a currency (just like Nowotny), he said that distributed ledger technology has all chances to be successfully adopted by banks.
At the same time, another ECB official, the bank’s Governing Council member, Ardo Hansson, who is also the head of Estonian Central Bank, compared this kind of bubble to a situation in which religious fanatics find themselves in. In his opinion, people are mostly controlled by emotions rather than rationality when it comes to bitcoin.
