Crypto shows all signs of financial stability risk: ECB

Crypto shows all signs of financial stability risk: ECB

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Bloomberg

A dramatic increase in the size and complexity of crypto markets means the sector is on track to become a risk for financial stability that must urgently be regulated, the European Central Bank (ECB) said.

While recent volatility has not proved contagious to the rest of the global financial system, the threat is increasing with institutional investors increasingly involved, the ECB said in a pre-released chapter from its financial stability

review.

“Based on the developments observed to date, crypto-asset markets currently show all the signs of an emerging financial stability risk,” the central bank said. “As this is a global market and therefore a global issue, global coordination of regulatory measures is necessary.”

The ECB has stepped up warnings and calls for tighter regulation in recent days since the stablecoin TerraUSD tumbled from its intended dollar peg earlier this month.

President Christine Lagarde said last week that in her view crypto is “worth nothing,” and Governing Council member Francois Villeroy de Galhau added to the skepticism saying that the promises of rewards in crypto were “an illusion.”

In an interview with Bloomberg Television’s Francine Lacqua from Davos, Lagarde reiterated that sentiment.

“All