The ECB has already built a system to analyze “the crypto asset phenomenon.” In the future, the ECB plans to go into more granular details to analyze crypto assets.
The European Central Bank (ECB) has issued a new report indicating that it plans to use more data from blockchains to better monitor the performance of cryptocurrency markets.
The report, which is entitled “Understanding the crypto asset phenomenon: its risks and measurement problems,” the report reveals that the ECB has already built a system that uses “high quality” aggregate data (available online) in its efforts to analyze “the crypto-asset phenomenon.” This can help the financial institution identify and monitor how financial technology could affect monetary policy and the risks that it potentially poses for market infrastructure, payments and financial stability.
However, the use of data available in this way has its limitations regarding their value. The report explains that these data leave “gaps and challenges” such as the exposure of financial institutions to cryptocurrencies and payment services that use layered protocols.
The report mentions the exposure of cryptocurrencies to investment derivatives and vehicles, financial companies that venture into escrow and other services, and payment platforms that use crypto assets as potential implications for financial policy and stability, among others.
Although they are currently “contained and/or manageable,” such links with regulated financial companies “can be eventually developed and increased.”
Regarding these issues of accurate data collection, the European Union banking authority says that it is especially difficult to retrieve public data on segments of the crypto asset market that remain outside the radar of public authorities.
They also explain that some relatively low liquid trading platforms may be affected by wash trading and indicate that there is no consistency in the methodology and conventions of institutionalized exchanges and commercial data providers. Besides, they predict that new and unexpected data needs may arise with more advances in crypto assets and related innovation.
In the future, the ECB plans to go into more granular details about its cryptocurrency analysis, and it promises to “continue to work on indicators and data by addressing the complexity and increasing challenges encountered when analyzing protocol transactions in chain and layers.”
Additionally, it aims at searching for new data sources to obtain information on the links between the encryption assets and the regulated companies.
Concerning transactions off the chain, transactions made off the blockchain and then re-added onto the chain in fewer transactions, the ECB promised to increase the “availability and transparency” of the data reported and the methods used to provide them, thus “harmonizing and enriching metadata and developing best practices for cryptocurrency indicators.”
To conclude, it is worth mentioning that financial institutions worldwide are increasingly incorporating blockchain technology to improve their functionality and the services that they provide. The use of this technology helps them have greater control over customer’s investment not only in fiat money but also in different kinds of cryptocurrencies.
Once again those interested in joining the cryptocurrency network have some good reasons to do so, namely the security provided by the use of blockchain technology and the support by important of financial institutions such as the European Central Bank.
By Willmen Blanco