Cryptocurrencies will never replace “General Money” - European Central Bank VP

By Miguel Gomez - November 10, 2017 (cryptovest.com)

ECB Vice President Vítor Constâncio believes that cryptocurrencies are a "misnomer" and that they will "never prevail as general money substitutes".

The European Central Bank was represented at the Financial Regulatory Outlook Conference in Rome yesterday, with its Vice President, Vítor Constâncio, speaking briefly about fintech and taking not-so-subtle jabs at the idea of cryptocurrencies.

“In the view of its enthusiasts, fintech will be radically disruptive, breaking industry boundaries and upending financial intermediation by eliminating traditional banks. There is a lot of exaggeration in this view. The footprint of new fintech firms is still rather small,” he said during his speech.

Despite having said that fintech doesn’t necessarily have a substantial impact, he went on to add that blockchains, machine learning, artificial intelligence, and decision algorithms “are currently being used by incumbent banks and asset managers” that cannot be “swarmed by nimble small fintech firms.”

“Nevertheless, some usage can be significantly transformative,” Constâncio added.

After saying that artificial intelligence and machine learning in asset management could present risks and would require more concentration by regulators, he segued almost immediately into the subject of cryptocurrencies:

“The so-called private 'crypto-currencies' can never prevail as general money substitutes. Their designation is a misnomer as they are not a currency but just a commodity used as a speculative asset and as a restricted medium of exchange in very special circumstances, comprising criminal activities or failed States with collapsed institutions,” he said.

From Constâncio’s point of  view, if cryptocurrencies (hypothetically) were to replace fiat money, they’d “end banking as we know it.”

It’s not the first time—nor do we expect this to be the last time—that a member of the European Central Bank has condemned cryptocurrencies.

Last month, Yves Mersch—an executive board member of the ECB—said that it is unclear who issues Bitcoin, seeming to miss the point that the cryptocurrencies do not have an issuer at all.

The statement itself demonstrates that some people in the financial world may find it difficult to understand how distributed ledgers can build currencies that self-perpetuate without requiring any central authority to control their supply.

Looking at all the commentary that members of the bank have made, the ECB has made one thing clear: It really isn’t very happy about the crypto world.