Christine Lagarde remains skeptical about cryptocurrencies and believes they pose a threat to central banks.
The president of European Central Bank, Christine Lagarde, has once again expressed her concern about the growth of the adoption of cryptocurrencies in Europe, during her participation in a round table on digital finance organized by the Bank of France. The president has reiterated in her speech on the Threat that cryptocurrencies pose to banking stability.
According to Lagarde, the growth of the cryptocurrency industry has the ability to hinder the role of central banks in acting as an “anchor” of the economyAt the same time, the senior official has warned that digital assets could lead to an era of free banking.
In her speech, Lagarde points out that banks should not be oblivious to issues related to the Experimentation with digital solutions, something that is also agreed with by the European official Fabio Panetta, who yesterday raised the possibility that the ECB use DLT technology for international payments.
For the ECB president, it is necessary for central banks respond to the demand for digital payments if they want to maintain their role as “anchor” of the economy.
“We, the central banks, have been operating as a monetary anchor for commercial banks and private money. If we are not in this game, if we are not involved in experimentation, innovation or central bank digital money (CBDC)“We risk losing the anchoring role that we have played for many decades,” Christine Lagarde explained.
The official pointed out the era of free banking, in the 19th century, and the problems of constant and successive crises, as an example of what could happen if we returned to a time in which the central bank loses its central role in the economy.
Central Banks Share Christine Lagarde's Crypto Skepticism
Lagarde shared a table with Jerome Powell, chairman of the United States Federal Reserve, who shares his skepticism about cryptocurrenciesPowell also discussed the possibility of creating a digital dollar that, while respecting user privacy, would not be anonymous, an indispensable feature in his CBDC ideal.
The rest of the characteristics of a CBDC would be immediacy, privacy protection (but without anonymity) and the ability to be transferable and interoperable.
Both Lagarde and Powell agree that the main role of a CBDC is replace the use of cryptocurrencies and stop the growth of Bitcoin and the rest of cryptoassets.
The FED president also explained that the decentralized finance (DeFi) have shown their vulnerability after the collapse of the Terra ecosystem. High rates of return make it vulnerable to collapses, which could be a problem for the world of traditional finance.
In this sense, Powell believes it is necessary create a regulation that adjusts these vulnerabilities now that the impact of DeFi on traditional finance is minimal.
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