ECB: Virtual or virtueless? The evolution of money in the digital age

08 February 2018

Yves Mersch sets out what he believes are some of the key regulatory questions that need addressing, and actions that need to be taken to mitigate the potential blowback from virtual currencies to the rest of the financial system.

[...]Now that VCs may grow to be economically significant, there is need to reduce the risk of negative impacts on the economy.

Virtual currencies are not money, nor will they be for the foreseeable future. Their market share is still small and their ties to the real economy are still limited.

But this can be subject to change. Regulators and legislators on all levels should therefore urgently pay close attention to mitigating the potential risks that could stem from growing VC business.

It is not unknown for new innovations to bring about euphoria and hype, which in turn fuel bubbles that eventually burst. And indeed, the hot air is already escaping from some of these bubbles.

But just because the initial euphoria and hype subsequently fade, it does not mean that the innovation is without virtue, even if early market leaders may not last the distance. [...]

Full lecture

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