ECB Warns About US Crypto Deregulation

As part of a risk assessment exercise conducted during its January meeting, the ECB stated that the recent developments in the deregulation of financial markets in the U.S., including crypto, might increase the risks of a future financial crisis.

ECB Warns That Crypto Deregulation Might Cause a New Financial Crisis

Crypto and bitcoin are now terms present in financial discussions of central banks around the world. The European Central Bank (ECB) recently revealed that it was assessing the effect of a more deregulated crypto ecosystem on the financial markets.

In a recently revealed memo that details the discussions held as part of its governing council monetary policy meeting held in January, the bank evaluated the risks of the new stance that the Trump administration had on crypto assets.

The document reveals that this issue, grouped with others like leverage and high valuations, concerns the bank in the long term.

“A further financial stability risk related to the prospect of a more deregulated financial system in the United States, including in the realm of crypto-assets,” the bank stressed.

Furthermore, the bank detailed:

This could allow risks to build up in the years to come and sow the seeds of a future financial crisis.

Recent developments in the crypto arena have evidenced a softer oversight of crypto markets, as the Securities and Exchange Commission (SEC) has dropped several high-profile cases against crypto exchanges.

Members of the ECB executive board have criticized bitcoin and crypto several times, highlighting that, as currencies, these did not fulfill the requirements necessary to become reserve assets.

In January, ECB President Christine Lagarde stated that reserve assets had to be liquid, secure, safe, and not be plagued by the suspicion of money laundering. She added that she was confident bitcoin would not enter the reserves of any European central banks.

Read more: Christine Lagarde en Garde: Bitcoin Will Not Enter Central Bank Reserves

Also, ECB executive board member Isabel Schnabel stressed that the bank was unlikely to purchase bitcoin at any point. In 2024, she asserted BTC was “a speculative asset that does not fulfill the characteristics of money.”

Read more: ECB Member Isabel Schnabel: Bitcoin Is ‘Speculative,’ ‘Unlikely’ to Be Purchased by the Bank