ECB Warns Central Banks of Bitcoin Integration Risks

The European Central Bank will reassess its relationship with any national central bank that incorporates Bitcoin into its reserves. This was stated by ECB board member Piero Cipollone in an interview with Reuters.

The institution will be compelled to evaluate the risks associated with REPO agreements and swap lines in such cases, the official explained. He added that there are currently no signs of any eurozone central bank integrating the first cryptocurrency.

“We will conduct an assessment if this happens,” noted Cipollone.

He believes that digital gold is unsuitable as a reserve asset, and its appeal is based on speculative interest.

“I try to think rationally about why I should invest in Bitcoin or another cryptocurrency. The only reasonable explanation is if someone thinks the price will always rise. It has no intrinsic value, no asset backing it, no earnings model,” the financier explained.

In January, it became known that the Czech National Bank decided to explore the possibilities of diversifying reserves with Bitcoin. The country is not part of the eurozone but is a member of the EU.

Cipollone also rejected comparisons of Bitcoin with gold, despite shared characteristics like scarcity and perception as a store of value. He largely attributed central banks’ investments in precious metals to historical traditions.

“Partly it’s about heritage, but gold has intrinsic, commercial, and industrial value. Bitcoin has none of this,” Cipollone believes.

He also emphasized that both assets are entirely impractical for payments. In this regard, the official expressed greater concern about stablecoins.

Digital Euro and Stablecoins

While “stablecoins” are not yet widely used as a means of payment, they undoubtedly will be, Cipollone acknowledged.

“This is concerning. If people in Europe start using stablecoins for payments, considering most are American and dollar-based, they will transfer their deposits to the US,” he noted.

In this capacity, assets like USDT or USDC could compete with the proposed digital euro.

The CBDC from the ECB, due to planned transaction and deposit limits, is primarily considered a means for retail payments. According to Cipollone, the central bank is exploring various innovative features for the digital asset, such as conditional payments. In such cases, money transfers would be executed automatically upon the occurrence or absence of a specific event or condition, he explained.

The official disagreed with the notion that the ECB is lagging in launching a CBDC. The work “is proceeding as planned,” he assured.

Cipollone also noted that following the European Parliament elections, the process of creating a legislative framework for the digital euro has accelerated. This was also facilitated by external political factors.

“The fact that the US President has so decisively advocated for the global promotion of dollar-denominated stablecoins is clearly a signal,” emphasized the ECB representative.

Back in the United States, Donald Trump banned the creation of a CBDC and formed a working group on cryptocurrencies. The focus of the group includes evaluating the creation of a national Bitcoin reserve and developing regulations for digital assets, including “stablecoins.”