Guest of the Banque de France, Christine Lagarde gave her opinion on the digital currencies of the Central Bank and the decentralized financial sector (DeFi). The President of the European Central Bank has repeatedly tackled cryptocurrencies. Certainly, cryptocurrencies are indispensable in some cases. Besides, the crypto market is gaining momentum. Lagarde is keen to point out its risks, however. Noting in passing that she “defends the bankers, and especially would not want to switch to an era of” free banking services “in crypto.
Speech by Christine Lagarde at the hearing of the Committee on Economic and Monetary Affairs of the European Parliament
Cryptoactive and non-cryptocurrency: great precision is essential!
During his speech, Lagarde was keen to emphasize the volatile and speculative nature of a crypto. She even qualifies this name as false. According to her, it would be more accurate to say “cryptoasset” since cryptocurrencies are “purely speculative”. To illustrate her point, she took the example of the Terra/Luna fiasco and the escape of TFL CEO Do Kwon.
The President of the ECB, however, recognizes the important place of crypto in today’s financial world. PayPal, Visa and Mastercard fully recognize its use. Also, 10-15% of Europeans and Americans have invested in crypto in 2021.
Lagarde backs digital euro over crypto
While Lagarde has clearly expressed her hostility towards cryptocurrencies, she does not hide her enthusiasm for the digital euro. More reliable and above all beneficial to banks and individuals, this currency aims to become an essential part of the daily lives of Europeans.
Scheduled for 2026 at the earliest, the digital euro will enable banks to preserve their role as regulator and “anchor”. At the same time, it offers users a safer alternative to cryptoassets.
With no less than a hundred central banks looking into the subject, the “digital euro” project will certainly involve the banks in the whole process. The goal: to avoid crisis after crisis. When they were absent from the monetary framework, central banks indeed engendered monetary crises on a global scale (as in the era of “free banking” in the 19th century).
While waiting for the arrival of the digital euro, the important thing for Lagarde and the organizer of the conference (the governor of the Banque de France) is to regularize the crypto market. Hoping for international cooperation in this regulation, François Villeroy de Galhau stressed that common and collective efforts in the regularization of cryptocurrencies would greatly compensate for their volatile nature.
European banks and cryptocurrencies are not yet on track to find a common agreement. The last hope for compromise rests on the adoption of the MiCA Law on cryptocurrencies in the European Union, by 2023. Thus, traditional banking entities will (perhaps) recognize the use of crypto.
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