Cryptocurrencies are too volatile for payments, says Christine Lagarde, who announces the ECB’s commitment to a digital euro project, aimed at restoring consumer confidence in money and payment systems. And, at the same time protecting the European economy and consumers from cryptocurrencies and electronic transactions run by foreign companies.
For Christine Lagarde and the European Central Bank, cryptocurrencies, in particular Bitcoin, is too volatile to be used in payments. So, it is necessary to produce rules that can protect consumers using and holding cryptocurrencies. Cryptocurrencies, Lagarde points out, exceed 10% in Europe and 16% in the US.
Lagarde: making cryptocurrencies suitable for payments
In her speech, Christine Lagarde emphasised the extreme volatility of the most popular and widely used cryptocurrencies. In particular Bitcoin and Ethereum, whose daily variations travel in parallel and in strong, though not direct, relation to the performance of the Dow Jones Industrial Average and S&P 500 indices.
Although the volatility of Bitcoin and Ethereum is at an all-time low, it is still very high. Which, according to Lagarde, would make them unsuitable for payments.
To protect and safeguard consumers who use cryptocurrencies for their payments and merchants, it is necessary, Lagarde points out, to introduce European regulation. Also, a new digital economic system that is modern, innovative, technologically advanced. But also secure and in line with European demands.
The Digital Euro project
The world of payments has to reckon with the advent of Big Tech cryptocurrencies. Whose entry could increase, says Lagarde, the risk of market dominance and dependence on foreign payment technologies. This would have serious consequences for Europe’s strategic autonomy.
Not only cryptocurrencies, but all electronic payments are for the ECB a threat to Europe’s strategic autonomy. In support of this observation, the ECB president pointed out that already today more than two-thirds of card transactions in Europe are handled by companies based outside the European Union.
To counter this problem, it is necessary for the ECB and the European Union, the project of a Digital Euro.
The legislative framework
The ECB, Lagarde said, is committed to designing and implementing a Digital Euro.
In the ECB’s sights, the Digital Euro should be a European policy innovation aimed at laying the foundations for a new economic system. The ECB’s ambition is therefore to develop a digital euro that can influence society as a whole.
This extremely ambitious project needs a well-defined and structured legislative framework. Aimed not only at ensuring that European citizens’ confidence in money and payment services is maintained. But that it plays a central role in defining a new European economy based on a reliable, efficient and secure payment system.
Christine Lagarde concluded her speech by showing interest in the regulatory proposal to be put forward by the European Commission. While at the same time hoping for a system capable of striking the right balance between the various elements.
Specifically, the ECB is aiming for high standards of privacy. Emphasising, however, that full anonymity is not an option, because it conflicts with the fight against money laundering or the financing of terrorism.