It has been relatively quiet on the virtual currency Bitcoin front recently, although there is some positive news here and there. For instance, the Bitcoin Investment Trust (BIT) got the go-ahead from the supervisory authorities in the United States and elections were held for two vacant seats on the Board of Directors of the Bitcoin Foundation. Belgian entrepreneur Olivier Janssens is one of the newly elected board members. In the midst of this relative calm, the European Central Bank (ECB) published its second report on virtual currency in February.
It is gratifying to see that the ECB is monitoring virtual currencies, such as Bitcoin. The ECB’s report seeks to provide a new definition of virtual currency from the perspective of a central bank:
Virtual currency can therefore be defined as a digital representation of value, not issued by a central bank, credit institution or e-money institution, which, in some circumstances, can be used as an alternative to money.
The ECB also devotes a section to the impact of virtual currency schemes (VCS) on the Eurosystem and its tasks, drawing the following conclusions. At the moment VCS do not pose a threat to price stability in the euro area, given their relatively low usage. However, the ECB will continue monitoring developments closely. Although in theory VCS could jeopardise financial stability in the euro area, the ECB believes this is unlikely. It considers VCS inherently unstable, arguing that they are subject to wide fluctuations in value. The ECB does not yet anticipate any risks from VCS for existing payment systems.
In closing, the ECB puts in a few good words for VCS, albeit somewhat reluctantly:
The ECB recognises that, besides their drawbacks and disadvantages, VCS could also have some advantages over traditional payment solutions and specifically for payments within virtual communities/closed-loop environments and for cross-border payments. As such, it is not excluded that a new or improved VCS may be more successful in future.