ECB to people: Not responsible if you lose money on Bitcoin, your governments are

(Photo: :European Central Bank Audiovisual Services)

Last Tuesday, 13 February Mario Draghi, the President of the European Central Bank in the most solemn terms said regulating or even banning Bitcoin “it’s not the ECB’s responsibility to do that”. However, he didn’t refrain from eagerly pointing out the very risky and misty nature of the digital ‘monies’. So, when asked again if one should buy Bitcoins, he replied “Frankly I would think (about buying) it carefully”, using the restricted jargon of central bankers.

He then underlined the fact of Bitcoin’s wild oscillations “much more than the euro’s” and he reminded everybody the cryptocurrencies are not supported by any public body. The ECB officially calls Bitcoin not a currency but a speculative asset. Its official site says “In other words, it is something that you can gamble on to make a profit, but with a risk that you will lose your investment. In short something like a Ponzi scheme.

This is a clear caution by the ECB for the wider public about the extremely risky nature of investing in cryptocurrencies. Draghi was speaking in a video conference, answering questions from the public. The event was organized at the central building of ECB in Frankfurt am Main. Nevertheless, he recognized the value of the blockchain technology, by valuing it as “quite promising” and commented it can generate “many benefits” in settling payments. He observed though that it’s still not safe enough to be used by central banks. It’s made known so far that two major central banks, the ECB and the Bank of Japan have being examining blockchain technology for about a year now.

Not about Bitcoin

This article however is not about Bitcoin and the other cryptocurrencies or what the global banking community is thinking or doing about all that. Such an attempt would greatly surpass the capacities of this writer. This article is about ECB’s attitude and action or rather inaction vis-à-vis the digital currencies. ECB has actually done nothing in relation to the authorization and administrative background, related to the functioning of cryptocurrencies.

Of course, on many occasions members of ECB’s Governing Council and more so some key members of its Executive Board, like Vice President Vítor Constâncio have warned the wider public about the unpredictable and extremely risky character of cryptocurrencies. The ECB has not taken any practical action beyond that point, unlike other central banks. For example, the central banks of China and South Korea have forbidden the fundraising through digital money.

The central Bank of Russia has blocked the websites selling Bitcoins and other digital moneys, while on the contrary the Bank of Japan has recognized the Bitcoin and some other cryptocurrencies as legal tender that is as cash acceptable for all purposes. The ECB has done nothing of that short and last Tuesday Draghi ‘officially’ confirmed this not going to change.

Pointing to governments

Given that digital monies are claims against some elusive private entity – not a central bank – Draghi rushed to ‘counsel’ the wider public about the structurally associated risks. It’s not our job he concluded to mend that. In this way and in a very clear manner he tells the 19 central banks and governments of the euro area member states, that it’s their responsibility to regulate, ban or officially authorize some functions of the cryptocurrencies. Up to now, in the borderless and quite chaotic environment of the World Wide Web a lot of Europeans are buying, selling, generating, investing, exchanging and in general being involved in this affair. No official action has being taken to protect those people or regulate the jungle.

If this unregulated universe continues expanding with the breathtaking tempo it has being growing up to now, there might come a moment where a lot of people could be severely hurt. Actually, this may come at any moment. In view of this dreadful prospect, this week Draghi  indirectly but quite clearly made the 19 central bankers and the governments of Eurozone responsible. He indirectly but loudly left it to be understood it’s up to them to regulate or why not altogether or partially ban the digital currencies.

ECB’s mandate

If there were more relevant questions addressed to Draghi about this issue, he would have certainly pointed out what the mandate of the ECB is. He has repeatedly underlined the fact that ECB’s only and at the same time exclusive task is to take whatever appropriate measures are needed, to drive the inflation rate close but below to two percent. The ECB serves this purpose with the relevant monetary policy.

Currently though, and in many ways inappropriately, a number of major euro area member states spearheaded by Germany and Holland believe and say so that the ECB should call off its extra relaxed monetary measures (zero interest rates and ample cash injections).

The ‘money bags’

In short, those critics of ECB’s policy are telling Draghi how to do his job, despite his clear and exclusive mandate for it. Not to forget that governments are institutionally asked to avoid meddling in it. The reason for their interference is of course that his policy helps the deficitary states of the South to cheaply refinance their debts and support growth. At the same time it denies any interest on deposits for the ‘money bags’ of the Union.

Obviously the salvation of some member states and ultimately of the single money itself are more important targets, than the interest rate on someone’s rich deposits. So the questions about the Bitcoin affair offered Draghi a pretty good chance, to remind to his critics that they have better take care of their neglected obligations, than illegally meddling in his monetary policy.

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

“An open China brings opportunities to Europe”, a Sting Exclusive by China’s Ambassador to EU

Hungary has made progress on greening its economy and now needs to raise its ambitions

On International Youth Day the European Youth Forum calls for true youth participation

Right2Water initiative: Is the Commission ready to listen to citizens?

Libya: EU efforts should focus on protecting migrants, MEPs say

Europe moulds global defense and security chart given US new inward vision

Judicial independence under threat in Nigeria, warns UN rights expert

Did Draghi ask the Germans to accept a drastic change of austerity policies?

Is it impossible to place the banks under control?

Ideology is the enemy of growth

Rich economies not a promise of education equality, new report finds

Here’s how India can soar in the Fourth Industrial Revolution

Brexit update: Leave campaign leads race but undecided voters will determine the outcome of the EU referendum

UN chief welcomes re-opening of key Gaza border crossing

Merkel refuses to consider the North-South schism of Eurozone

World simply ‘not on track’ to slow climate change this year: UN weather agency

Britain declares trade war on mainland Europe

Extra mild ECB tapering of QE and zero interest rates keep euro low

4 things to know about the state of conflict today

Latest leaked TTIP document confirms EU sovereignty may be under threat

Human rights: breaches in Russia, the Rakhine State and Bahrain

ECB’s €1.14 trillion again unifies Eurozone; Germany approves sovereign debt risks to be pooled

Speeches of Vice Premier LIU He and Vice President of the European Commission Jyrki Katainen at the Press Conference of the Seventh China-EU High-level Economic and Trade Dialogue

COP21 Breaking News_04 December: Commitments Made to Reduce Black Carbon, Methane and HFCs

The US-Mexico trade deal a threat for others, Trump to single out China, Europe

More attacks, ‘persisting security challenges’ threaten progress in West Africa, Sahel

Drugs cost too much. There is a better way to fund medical innovation

A silent killer: the impact of a changing climate on health

MEPs agree on new rules to tax digital companies’ revenues

EU should promote immigration as a humanitarian issue in order to provide a more permanent solution

‘Leaders who sanction hate speech’ encourage citizens to do likewise, UN communications chief tells Holocaust remembrance event

EU Parliament and Council: Close to agreement on the bank resolution mechanism

These countries are pioneering hydrogen power

SMEs and micro firms sinking together with south Eurozone

More than 750 million people around the world would migrate if they could

How the digital finance revolution can drive sustainable development

Why poorer people suffer more from climate change

How AI can inspire doctors to be more inventive

The banks want now free capital from taxpayers

Draghi’s top new year resolution: Quantitative Easing

Top UN officials strongly condemn ‘horrible terrorist act’ in Nairobi

France asks help from Germany but it will not be for free

At Ministerial session, UN regional office in Beirut to focus on technology for sustainable development

EU Parliament shows its teeth in view of 2014 elections

Europe is now practically divided as in the Cold War

At G20 Summit OECD’s Gurría says collective action vital to tackle global challenges

Brexit: Is there anybody supporting a non-violent separation?

UN-led Yemen ceasefire monitoring team gets ready to begin operations

Renewed pressures on Berlin to adopt growth policies

IMF launches a new offensive against Germany

AI could be a silver bullet for healthcare in ASEAN

3 autonomous vehicle trends to follow in 2019

Towards a zero tobacco public space in Cameroon

Here are five things to know about the future of being human

Stable growth momentum in the OECD area

Human rights breaches in Azerbaijan and Sudan

FROM THE FIELD: Rohingya babies conceived out of ‘incomprehensible brutality’

The unpleasant truth of plastic straws

5 ways to make your organization a great sustainability partner

The EU slams Theresa May’s Brexit option; sets base for own European defense, security platform

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s