European Central Bank board member Yves Mersch said at a conference in Turkey that due to the volatility of virtual currencies such as bitcoin, banks must back any business involving cryptocurrencies with appropriate amounts of capital and keep it isolated from other trading and investment activities, Reuters reported.
"There's a need to examine whether any [virtual currency] activity carried out by [financial market infrastructures] should have to be ring-fenced," Mersch reportedly said.
He added that the virtual currency market is currently too small to threaten financial stability, but that could change if they were to be used as collateral for loans or for the settlement of trades at clearinghouses, Reuters said.
