Featured Product

    ECB Examines Risks and Monitoring Issues Associated with Crypto-Assets

    August 07, 2019

    ECB, in the fifth issue of its Economic Bulletin, published an article examining the risks posed by crypto-assets and the ways to enhance monitoring of these risks. The article describes the characteristics of crypto-assets, identifies the primary risks of crypto-assets that warrant continuous monitoring, and outlines the linkages that could cause a risk spillover. It then discusses the indicators for monitoring crypto-assets (based on publicly available data), the availability and reliability of data, existing data gaps, and ongoing statistical initiatives of ECB that attempt to overcome the outstanding challenges. Finally, the article offers a number of conclusions and points to the way forward for monitoring crypto-assets.

    The article highlights that crypto-assets can be defined and analyzed from different perspectives, namely their underlying technology, their features, and the economic implications of such assets. ECB chose to define crypto-assets as a new type of asset recorded in digital form and the focus is on the regulatory, economic, and business dimension of crypto-assets as a new asset class, rather than on the use of technologies that are needed for its existence. The article highlights that crypto-asset risks primarily originate from the lack of an underlying claim, their (partially) unregulated nature, and the absence of a formal governance structure. The extent to which the financial system and the economy may be exposed to crypto-asset risks depends on their interconnectedness. Holdings of crypto-assets, investment vehicles, and retail payments represent the main linkages among the crypto-asset market, the financial systems, and the broader economy.

    Crypto-assets are enabled by distributed ledger technology and characterized by the lack of an underlying claim. In the light of the implications they might have for the stability and efficiency of the financial system and the economy and for the fulfillment of the functions of the Eurosystem, it is believed that crypto-assets warrant continuous monitoring. Thus, ECB has set up a dataset based on high-quality publicly available aggregated data complemented with other data from some commercial sources, using application programming interfaces and big data technologies. However, important gaps and challenges remain: exposures of financial institutions to crypto-assets, inter-linkages with the regulated financial sectors, and payment transactions that include the use of layered protocols are all examples of domains with prominent data gaps. 

    The challenges in measuring the phenomenon of crypto-assets are diverse and relate both to on-chain and off-chain data. Additionally, new and unexpected data needs may well arise with further advancements in crypto-assets and related innovation. Statistical initiatives by ECB and the central banking community are expected to provide a valuable input to efforts aimed at closing the data gaps associated with crypto-assets. Looking ahead, ECB will continue to work on indicators and data by dealing with the complexity and growing challenges encountered in analyzing on-chain and layered protocol transactions. Furthermore, investigation will continue on the new data sources for information on inter-linkages of crypto-assets. With respect to the off-chain transactions, amid a multitude of methodological options, further work will focus on increasing the availability and transparency of the reported data and the methodologies used, harmonizing and enriching the metadata, and developing best practices for indicators on crypto-assets.

    Related LinkArticle on Crypto-Assets


    Keywords: Europe, EU, Banking, Securities, Crypto Assets, Distributed Ledger Technology, Economic Bulletin, Fintech, Big Data, ECB

    Related Articles

    EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models

    The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.

    June 21, 2022 WebPage Regulatory News

    BIS Hub Updates Work Program for 2022, Announces New Projects

    The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.

    June 17, 2022 WebPage Regulatory News

    US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule

    Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)

    June 16, 2022 WebPage Regulatory News

    EIOPA Consults on Review of Securitization Framework in Solvency II

    The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.

    June 16, 2022 WebPage Regulatory News

    UK Authorities Issue Regulatory and Reporting Updates for Banks

    The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.

    June 15, 2022 WebPage Regulatory News

    BaFin Consults on Resolvability Requirements for Resolution Planning

    The Federal Financial Supervisory Authority of Germany (BaFin) proposed to amend the “Capital Investment Conduct And Organization Ordinance” and issued a draft circular on the minimum resolvability requirements for resolution planning.

    June 10, 2022 WebPage Regulatory News

    EBA Consults on Certain Standards and Guidelines Under CRR and BRRD

    The European Banking Authority (EBA) proposed guidelines, for the resolution authorities, on the publication of the write-down and conversion and bail-in exchange mechanic, with the comment period ending on September 07, 2022.

    June 08, 2022 WebPage Regulatory News

    OJK Publishes Regulatory Updates for Financial Sector Entities

    The Financial Services Authority of Indonesia (OJK) is strengthening cooperation with the Australian Prudential Regulation Authority (APRA) and the Japanese Financial Services Agency (JFSA)

    June 03, 2022 WebPage Regulatory News

    EU Publishes Rules on DLT and Data Governance

    The European Parliament and the Council published Regulation 2022/868 on European data governance (Data Governance Act).

    June 03, 2022 WebPage Regulatory News

    EBA Publishes Phase 2 of Reporting Framework 3.2

    The European Banking Authority (EBA) published phase 2 of its reporting framework 3.2. The technical package supports the implementation of the updated reporting framework by providing standard specifications

    June 03, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8267