Just weeks ago, it was reported that the president of the European Central Bank (ECB), Christine Lagarde, said at the 2020 Central Bank ECB Forum that the central bank will definitely issue a digital euro, as it is something that needed to be explored because the tech is cheaper, faster, and safer for consumers.
Now, Lagarde has yet again spoken in favor of the central bank digital currency, only this time she criticized bitcoin. In an article published by L’ENA hors les murs, a magazine for former students of a school that trains France’s civil servants, Lagarde said Bitcoin as a cryptocurrency does “not fulfill all the functions of money,” while speaking in favor of “possible introduction of a digital euro.”
She noted that a digital euro could be “important,” as it complement’s cash, can future-proof the nation’s currency, and even rival cryptocurrencies minted by other nations. In addition, it could also fuel the creation of new jobs.
“A digital euro would also be an emblem of the ongoing process of European integration and ultimately help to unify Europe’s digital economies,” she continued.
However, her opinions differ when it comes to Bitcoin and other cryptocurrencies. She outlined that “crypto-assets pose risks,” while acknowledging the fact that tokens like bitcoin help mitigate the “double-spending” problem, referring to the process where transactions on the bitcoin network need to be validated by nodes.
But, she believes the main risk lies “in relying purely on technology and the flawed concept of there being no identifiable issuer or claim.” According to Lagarde, this is why cryptocurrencies like bitcoin are “highly volatile, illiquid and speculative, and so do not fulfill all the functions of money.”
Stable coins are no better
She did not leave out private stablecoins that exist, or are currently in development, as she noted that coins like Tether and the upcoming Libra Stablecoin, also “pose serious risks.”
“If widely adopted, they could threaten financial stability and monetary sovereignty,” she said.
She believes if the issuer couldn’t absorb losses, a run could occur. Due to The private nature of these digital assets, central banks, like the ECB, wouldn’t be able to determine a country’s monetary policy.
Meanwhile, Lagarde’s comments come at a time when Bitcoin just touched new 2020 highs and is taking a shot at surpassing $20,000. The market is completely bullish, and whatever a banker says, it is unlikely to hurt Bitcoin at this point in time.
