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Gold rush with no gold

by Communication Team | Feb 09, 2018

Gold_Rush_smallInterviewed by Bloomberg, Yves Mersch, Executive Board of the European Central Bank (ECB) expressed his and other central bankers’ concern about the growing popularity of virtual currencies. Indeed, Mersch confirms that all currencies are supposed to preserve consumer confidence, something that virtual currencies (VCs) could potentially undermine. “There is so much money flowing in that it’s like a gold rush – but there is no gold”.

It’s a delicate topic as citizens are free to do what they please with their capital, even if their actions imply losing their savings. Yet, in their supervisory – and not regulatory role – central banks feel responsible to inform the public about the implications of ICOs and VCs. Indeed, the implications of VCs go beyond their apparent investment potential. Their expansion could have serious consequences on everything from payments systems, banks, the infrastructure of financial markets as well as the core functioning of central banks. There is still a clear distinction to be made, stresses Mersch, between “virtual private initiatives, not backed by anyone, and trusted public currencies that are legal tender and backed by whole economies”. Ultimately, the role of the ECB to is to protect market integrity and the consumer, and VCs don’t seem to do either.

When asked what he thinks about a potential digital central bank-issued currency, Mersch does not dismiss the idea as a future possibility as long as it remains a “digital representation of cash” with all its current features and attributes.

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