ECB President Lagarde Says Cryptocurrencies Are Not Money

Bitcoin’s two primary use cases are as a store of value and a payment method. The leading cryptocurrency has given investors a hedge in times of rising inflation and ballooning balance sheets at central banks. Year to date, the bitcoin price has advanced 61%.

Meanwhile, users are also testing bitcoin’s mettle as a payment method, with countries such as El Salvador deeming the flagship cryptocurrency as legal tender. Bitcoin is also increasingly being accepted by businesses to pay for goods and services,  with movie chain AMC Entertainment the latest company to catch crypto fever.

Now Christine Lagarde, president of the ECB, has come out swinging against cryptos, saying in an interview with Bloomberg that they “are not currencies” and adding:

“Cryptos are highly speculative assets that claim their fame as currency possibly but they’re not.”

Bitcoin billionaire Tyler Winklevoss agreed with Lagarde in the sense that cryptos are not issued by the state, implying that this is a feature and not a bug.

If by “currency” you mean issued by the state, then yes, they are not. And that’s a good thing. https://t.co/uCmPvwQzXW

— Tyler Winklevoss (@tyler) September 17, 2021

Digital Euro

Meanwhile, the ECB is currently in the process of developing its own digital euro, as policymakers race to compete with the innovation in the private sector. The regulatory wheels move slowly.

The ECB is launching a two-year “investigative phase” that will get underway next month in which it will weigh the potential features of a digital euro as well as the impact on the economy and financial markets. Lagarde wants to give consumers the option to pay in a digital currency that “does not jeopardize the whole banking system,” according to her.

Race to Digitization

European policymaker Benoît Coeuré has warned that central banks are not moving quickly enough to introduce their own versions of digital currencies. Coeuré believes that the one-two punch of stablecoins, such as Tether that is pegged 1:1 to the U.S. dollar, and decentralized finance (DeFi) stand to compromise the way banks do business.

Changpeng “CZ” Zhao, who is at the helm of leading cryptocurrency exchange Binance, believes that central bank digital currencies (CBDCs) will be good for the cryptocurrency industry. He told the South China Morning Post that CBDCs will help to “promote bitcoin and cryptocurrencies to become a means of payment,” as consumers become comfortable with making micro-payments with digital assets.