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European Central Bank Seeking to Create Tools to More Effectively Monitor Crypto Assets

The European Central Bank (ECB) has released a report through which it reveals its efforts so far in assessing the crypto economy to find out how it relates to the traditional financial world and how it can influence monetary policy.

“The ECB has been analyzing the crypto-asset phenomenon with a view to identifying and monitoring potential implications for monetary policy and the risks crypto-assets may pose to the smooth functioning of market infrastructures and payments, as well as for the stability of the financial system.”

The report titled “Understanding the crypto-asset phenomenon, its risks, and measurement issues” was published on Wednesday.

However, the blockchain presents a unique challenge for the kind of data collection the ECB intends to employ. Data is not readily available and the one that does not effectively account for the fact that blockchain contains both on-chain and off-chain transactions. In addition, the report states that there could be businesses that use layered protocols to carry out transactions which in turn leads to “gaps and challenges” for the central bank.

For the services that may have an effect on the monetary policy, the report lists a few such as digital asset derivatives, custody services offered by investment firms and other traditional industry firms venturing into cryptocurrency as well as payments platforms seeking to develop solutions based on blockchain technology which could potentially affect the overall financial landscape.


There is good news for such a venture as sought by the ECB. The increasing demand for data services especially in the blockchain scene has led to an increasing number of data services providers who are trying to solve the challenges. There is also an increasing rate of collaborations between traditional firms with blockchain-based firms that will possibly lead to better data collection and more informed insights.

“Specifically, it is hard to retrieve public data on segments of the crypto-asset market that remain off the radar of public authorities; some relatively illiquid trading platforms may be affected by wash trading, and there is no consistency in the methodology and conventions used by institutionalized exchanges and commercial data providers. Moreover, new and unexpected data needs may well arise with further advancements in crypto-assets and related innovation,” the report reads.

Meanwhile, the bank is investing in creating data collection and reporting tools that will help it deal with the “complexity and growing challenges encountered in analyzing on-chain and layered protocol transactions.”

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