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ECB warns of potential risks in bitcoin futures trading

Trading in bitcoin futures could present a potential risk to financial stability if financial institutions are left liable for losses, a member of the executive board at the European Central Bank has warned.04 Jan 2018

Yves Mersch highlighted the potential risk in an interview with German newspaper Börsen-Zeitung, republished on the ECB website.

Trading in bitcoin futures opened last month for the first time. Investors essentially bet on whether the price of the cryptocurrency bitcoin will rise or fall during a set period.

Mersch said: "If these transactions are kept separate from others, it’s a secondary matter who wins and who loses. However, if all the participants in these financial centres are jointly liable, that can create difficulties, for instance, for banks or the whole system. And if the banking system gets into trouble, there will again be demands for support from the ECB. I would say from the outset: we shouldn’t do this."

Mersch said it is up to regulators to evaluate the size of the risks arising from cases where banks "hold positions in bitcoin". Were stock exchanges and other financial market infrastructures to enter this market it would represent "a major threat to financial stability", he said.

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