The European Central Bank is concerned about developments in the cryptocurrency markets, but does not see them as a threat to the financial stability of the euro area. This was demonstrated on Wednesday in the Financial Stability Review by the European Central Bank in May.

“The surge in bitcoin prices has overshadowed previous financial bubbles, such as the tulip mania and the South Sea Bubble in 1600 and 1700,” the ECB wrote.

According to the ECB, the strong rise in prices is mainly attributable to private investors, although some institutional investors are now also interested in crypto.

“The huge price fluctuations make bitcoin risky and speculative,” the ECB warns, while the “exorbitant” energy consumption and possible use for illegal purposes are grounds for concern.

However, as cryptocurrencies are hardly used for payments and institutions in the euro area still have little exposure to financial instruments linked to crypto, the risk to financial stability is limited at the moment, the ECB concluded.

About the author: Nick Schramm

Nick Schramm is tech savvy with strong engineering education behind. His interest in sciences helps the whole WeeklyNewsReview stuff to keep informed about various topics of the modern technology.

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