As the European Central Bank (ECB) is intensifying its efforts to roll out a digital euro, Christine Lagarde, President of the ECB, is also mounting attacks on bitcoin (BTC), among other cryptoassets and stablecoins.
In her article, published today in the L’ENA hors les murs magazine, the president of the bank which serves 19 member states of the European Union that use the euro, said that “central bank money in digital form is still not available for retail payments,” but the ECB’s Governing Council has been exploring the possibility of issuing a new central bank digital currency (CBDC), a digital euro, in an attempt to respond to the accelerating trend toward digitization in payments.
“A digital euro would complement cash and ensure that consumers continue to have unrestricted access to central bank money in a form that meets their evolving digital payment needs,” Lagarde said, adding that “a properly designed digital euro would create synergies with the payments industry and enable the private sector to build new businesses based on digital euro-related services.”
However, she contrasted the designed CBDC with bitcoin and other cryptoassets which Lagarde views as risky to their users, all the while conceding that they have generated new opportunities.
“The main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim. This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfill all the functions of money,” according to Lagarde.
However, while the President claims that these assets are illiquid, the 24-hour BTC trading volume surpassed USD 20bn today, ethereum (EHT), the second-largest cryptoasset, also surpassed this threshold today.
Bitcoin volatility chart
“Recently, we have seen the emergence of stablecoins, which try to solve crypto-assets’ problem of a lack of stability and trust by pegging their assets to stable and trusted fiat money issued by States. And the issuers of “global” stablecoins, which target a global footprint, further aim to introduce their own payment schemes and clearing and settlement arrangements,” she added.
While Lagarde said that stablecoins can drive additional innovation in payments and calls them “well integrated into social media, trade and other platforms,” she also said that they pose risks to their users.
“If widely adopted, they could threaten financial stability and monetary sovereignty. For instance, if the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur. Additionally, using stablecoins as a store of value could trigger a large shift of bank deposits to stablecoins, which may have an impact on banks’ operations and the transmission of monetary policy,” according to the ECB President.
Lagarde also said that those stablecoins that have the backing of big tech companies could also put Europe’s competitiveness and technological autonomy in jeopardy.
Global tech businesses could “attempt to leverage their competitive advantage and control of large platforms. Their dominant positions may harm competition and consumer choice, and raise concerns over data privacy and the misuse of personal information,” she wrote.
The bank’s president offered no further details on the designed timeframe of the digital euro’s issuance in her article. However, a recent paper authored by a group of economists and policymakers from the ECB stated that introducing “a CBDC sooner rather than later could give rise to a significant first-mover advantage to its issuer.”
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