Just recently, the European Central Bank has issued a report where it hints that they have few positives on crypto. This report also highlights the risks related to crypto and crypto adoption, with the main one being financial stability. This comes after the recent performance of the crypto market, with the whole market, including Bitcoin, being extremely volatile.
According to this report, the usage of cryptocurrencies and Bitcoin decreases the level of the financial stability of retail investors. As such, the usage of cryptocurrencies could threaten the financial stability of the Eurozone. Moving on, the report also mentions the fact that crypto adoption has been increasing throughout recent years, with more retail and institutional investors accepting it. Among other things, it emphasizes the fact that the crypto market is accountable for only 1% of the whole global financial system, making it somewhat similar to the mortgage markets in 2008-2009; the same ones that played a key role in the crash of ’08.
Although the report touches upon the volatility of the crypto market, it states that volatility is decreasing as time passes. The ECB also thinks that using crypto investments to diversify is not that safe, considering that cryptos are high-risk assets.
Cryptocurrencies Are Not Efficient, According to the ECB
Because crypto is volatile, it currently does not provide a good store of value nor a reliable payment method. The ECB also warned every investor of the possibility of losing their investments when investing in cryptocurrencies. It claims that, as crypto grows, financial stability risks to get more unstable.
One good thing that this report states is that the EU crypto regulations are in the works. This hints at EU crypto adoption in a way. To conclude the report, ECB once again mentions the fact that crypto adoption will be dangerous to global financial stability.