Cryptocurrencies like bitcoin and the banks and financial firms that trade them need to be more closely regulated, one of the ECB's top policymakers said on Thursday. Officials from the world's top economies are set to discuss the impact of digital currencies at next month's G20 meeting in Argentina and are expected to signal a more coordinated approach to their regulation.
"Any virtual currency business of credit institutions needs to be rigorously supervised to ensure that risks emerging from such activities are contained," ECB Executive Board member Yves Mersch said at an event in London. Mersch said that proper protocols were needed to meet anti-money laundering and counter terrorist financing regulations.
"Furthermore, given the risks posed by leverage, credit institutions should not accept virtual currencies as collateral (by banks)," he added. Mersch is the latest of a slew of global policymakers to speak out against digital currencies after their meteoric rise last year. Bitcoin, the best-known crypto asset, rose more than 1,000 percent in 2017. This year, however, the threat of regulatory clampdowns and bans from credit card firms to social media sites, has already caused it to tumble about 50 percent.
In the same vein, relevant market authorities should also monitor, analyse and regulate Initial Coin Offerings (ICO) - where companies or projects issue their own digital coins or 'tokens' as a way of raising real world money from the public. In 2016, the total amount of funds raised through ICOs was less than 82 million euros. This number dramatically increased to over three billion euros in 2017.