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Abu Dhabi, UAESunday 24 June 2018

European Central Bank's Nowotny says central banks considering cryptocurrency regulation

ECB considering following China's move to regulate cryptocurrencies like Bitcoin

Bitcoin (virtual currency) coins placed on Dollar banknotes, next to computer keyboard, are seen in this illustration picture, November 6, 2017. REUTERS/Dado Ruvic/Illustration
Bitcoin (virtual currency) coins placed on Dollar banknotes, next to computer keyboard, are seen in this illustration picture, November 6, 2017. REUTERS/Dado Ruvic/Illustration

European Central Bank governing council member Ewald Nowotny said on Thursday that legislators and central bankers are discussing whether they should intervene to regulate cryptocurrencies, as China already has done.

“We’re asking ourselves if legislators or central banks should intervene, as happened in China where they banned (the use of cryptocurrencies) because they consider them fraudulent,” Bank of Austria’s Nowotny said at a conference in Florence.

Chinese authorities in September ordered Beijing-based cryptocurrency exchanges to stop trading, in a move aimed at limiting financial risks surrounding the highly speculative market that has grown rapidly this year.

However, Nowotny played down the possible risks cryptocurrencies such as Bitcoin represent for the wider financial system.

“This market is not so large, so it cannot create financial instability,” he said, adding that investors needed to understand the product.

“It is like buying shares on the bourse ... people investing in this product can suffer losses and if that happens, they simply have to accept it,” he said.

Underscoring the volatility in the market, Bitcoin lost almost a third of its value in less than four days last week, but has staged a strong recovery this week.