Institutional investors, including hedge funds and family offices, are actively increasing their investments in bitcoin (EXANTE: Bitcoin) and cryptocurrencies in general as big players seek more ways to diversify their portfolios, the European Central Bank wrote in a report.
Subscribe to our Telegram channel to get daily short digests about events that shape the crypto world
That growing interest in cryptocurrencies might post systemic risk as retail investors show more interest in digital assets although cryptocurrencies lack consumer protection and are full of misleading information, the regulator said. The ECB warns that greater involvement of financial institutions could "fuel the growth of crypto-assets still further and increase financial stability risks."
"If current growth and market integration trends persist, then crypto-assets will pose a risk to financial stability."
The European financial watchdog says the wider involvement of financial institutions in the crypto market would increase the potential for "spillover to the wider economy, particularly if leverage were employed." The central bank noted that cryptocurrencies will likely pose "risks to financial stability," should the current trends continue.
Access more than 50 of the world's financial markets directly from your EXANTE account – including NASDAQ, London Stock Exchange and Tokyo Stock Exchange