integration. what i have in mind instead is “ genuine ” integration, whereby financial resources are allocated with reference to the risk - return relationship and not to location ‒ a process which would improve economic diversification in that it would cushion both entrepreneurs and households against local shocks. 16 this should naturally reduce the negative impact of an overextended financial sector by decreasing the probability of inefficient booms and severe busts. how can a single market for capital be realised? in addition to the better integration of governance that i have just talked about, the process rests on the improved integration of retail banking and capital markets. as regards retail banking, even before the crisis, we at the ecb acknowledged that this is one of the least integrated markets in the euro area. 17 the crisis undermined the process of integration by prompting a further retrenching of retail banking services within national borders. the new regulatory and supervisory framework has the potential to steer us towards deeper cross - border integration, and, in the process, to address europe ’ s over - reliance on large banks. evidence before the crisis suggested that the integration of retail lending markets may be a more efficient mechanism for cross - border risksharing than secured or unsecured interbank markets. it is important that the banking union is europe overbanked? report of the advisory scientific committee of the european systemic risk board, no 4 / june 2014. please refer to the financial stability board data gaps initiative and the consultation paper of the aggregation feasibility study group on approaches to aggregate otc derivatives data, february 2014. it should be noted, however, that financial integration can foster the specialisation of production across countries because financial intermediaries having a comparative advantage in lending to local industries can “ reinsure ” across borders. this can be more profitable but increases the exposure of domestic intermediaries to local shocks as well as cross - border contagion risk. the overall effect is ambiguous and can be positive under some assumptions. see fecht, gruner, h. p., and p. hartmann, 2012. financial integration, specialization and systemic risk, journal of international economics. european central bank “ financial integration in europe ”, april 2008. bis central bankers ’ speeches and the regulation against the “ too big to fail ” problem effectively encourage banks to reach an optimal size relative to the european market – that is, large enough to operate across borders and diversify risks, but small enough to be resolved with the resources of

2023. for visibility reasons, the maximum of the yaxis for chart 2, panel b is set to 5. nevertheless, on 30 and 31 january 2021 the price volatility of doge exceeded 28. oil data refer to the european brent spot price. the altcoins ’ names are abbreviated as follows : bitcoin ( btc ), ether ( eth ), polkadot ( dot ), ripple ( xrp ), cardano ( ada ), litecoin ( ltc ), chainlink ( link ), dogecoin ( doge ), binance coin ( bnb ), bitcoin cash ( bch ), uniswap ( uni ), solana ( sol ). such high volatility also means that households cannot rely on crypto - assets as a store of value to smooth their consumption over time. similarly, firms cannot rely on crypto - assets as a unit of account for the calculation of prices or for their balance sheet. moreover, unbacked cryptos do not improve our capacity to hedge against inflation. indeed, their price developments exhibit an increasing correlation with stock markets ( chart 3 ). and empirical analysis finds that momentum in the crypto - asset market and global financial market volatility do have an impact on bitcoin trading against fiat currencies. chart 3 returns correlations of bitcoin vis - a - vis selected financial assets ( yearly rolling correlation ) sources : bloomberg, s & p global iboxx, cryptocompare and ecb calculations. notes : the data are for the period from 1 january 2016 to 16 june 2023. cryptos as a means of gambling and circumvention but the very instability of unbacked cryptos does make them appealing as a means of gambling. and their use as such has been facilitated by the establishment of a centralised market structure that supports the broader use of crypto - assets. crypto exchanges have become gateways into the crypto ecosystem, often providing user access to crypto markets in conjunction with other services like wallets, custody, staking [ 20 ] or lending. off - chain grids or third - party platforms have offered users easy and cost - effective ways to engage in trading and speculation, while stablecoins are being used to bridge the gap between fiat and crypto by promising a stable value relative to fiat currency. besides gambling, crypto assets are also being used for bypass