European banks move toward holding cryptocurrencies

President of the European Central Bank, Mario Draghi,  has publicly stated that European banks could hold positions in Bitcoin.

The announcement has followed other mainstream developments such as Bitcoin futures contracts listings by US exchanges.

During the opening statement and closing remarks at a European Parliament meeting this week, ECB head Draghi weighed in heavily on the topic of cryptocurrencies.

He also referenced cryptocurrency discussions by other speakers throughout the meeting.

Banks ignoring public interest in crypto

Mr. Draghi revealed that European banks have widely been ignoring the current trend of holding cryptocurrencies.

Despite a heightened public interest and appetite for cryptocurrencies, he said that financial institutions in the European Union “are showing a limited appetite for digital currencies like Bitcoin.”

Draghi admitted that this trend is predicted to soon change as cryptocurrency breaks into mainstream finance, saying:

 

“However, recent developments, such as the listing of Bitcoin futures contracts by US exchanges, could lead European banks too to hold positions in Bitcoin, and therefore we will certainly look at that.”

This statement is a significant one from the central banker, despite his following comments that deemed “unregulated” Bitcoin and other cryptocurrencies as “very risky assets.”

This statement is a significant one from the central banker, despite his following comments that deemed “unregulated” Bitcoin and other cryptocurrencies as “very risky assets.”

Although deeming them as “risky,”  Draghi went on to conclude that banks should proactively consider including digital assets in their portfolio.

Much to the disdain of many Wall Street banks, the CME Group, the world’s most essential derivatives exchange, listed Bitcoin futures contracts in mid-December.

The EU central banking head also hinted at upcoming moves toward a ‘Single Supervisory Mechanism’ to oversee digital assets’ risks toward banks or supervised institutions.

According to CCN, Draghi has previously stated that the ECB does not have the authority to regulate bitcoin but his remarks this week suggest a more supervisory – not regulatory – approach to bitcoin and cryptocurrencies adopted or allowed among EU banks and possibly nations. Somewhat contradictorily, Draghi also indicated – later that month in October 2016 – that cryptocurrencies hadn’t matured enough for the ECB to consider regulation.

In November, Draghi added that bitcoin and the broader cryptocurrency sector’s impact was “pretty limited” and did not pose any risks for central banks as decentralized cryptocurrencies that fundamentally reject the control of money supply through a few institutions.