Christine Lagarde, president of the European Central Bank, has continued to express alarm about the emergence of cryptocurrencies and their danger to the conventional banking system.
According to Lagarde, the expansion of cryptocurrencies has the potential to impede the capacity of central banks to serve as the ‘anchor’ of the economy, while digital assets may usher in the age of free banking.
She added that banks must be active in things pertaining to the experimentation of digital solutions, while also urging lenders to react to the need for digital payments in order to maintain the anchor position.
She added: “And there are historical precedents of times when the central bank’s monetary anchor was absent, leading to crisis after crisis.” During the era of open banking in the nineteenth century, this was undoubtedly the case. Do we want to return to those times? Most likely not.”
During a panel discussion regarding digital banking, the head of the ECB criticized cryptocurrencies, claiming that they had no value.
Jerome Powell, chairman of the Federal Reserve, also attended the event and discussed building a central bank digital currency (CBDC) while emphasizing that the product would not be anonymous. He demonstrated four desirable qualities of a potential CBDC.
“First is the intermediary. The second is safeguarded for privacy, while the third is identity-verified and so not anonymous. The instrument would not be a carrier instrument.”
Similar to the present conventional banking system, Powell emphasized that a potential CBDC must balance privacy protection with identification verification.
Notably, the majority of governments are advocating for the regulation of cryptocurrencies in an effort to prevent the expansion of private digital assets. In this instance, the emphasis has been focused on implementing CBDCs to combat the rise of assets such as Bitcoin (BTC).
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