ECB President calls for crypto asset crackdown

Christine Lagarde describes cryptocurrencies as “highly speculative, very risky assets” that are “based on nothing”

The president of the European Central Bank (ECB) has called for a regulatory crackdown on crypto assets, describing them as “highly speculative, very risky assets”. 

Christine Lagarde

In an interview with the Dutch television programme College Tour, Christine Lagard stated: “My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying asset to act as an anchor of safety.”

Speaking before an audience of college students, the former head of the International Monetary Fund (IMF) expressed her concern that young people are investing in crypto assets with expectations of consistent returns and putting themselves at risk. 

She argued that investments in the sector should be made only “by people who have their eyes wide open about the fact that they can lose it all. I mean it’s gone down by 20% last week.”

Six weeks ago, the capitalisation of the total cryptocurrency market stood at $2trn; by noon on Monday this metric stood at $1.3trn. 

Although a so-called ‘crypto winter’ had been forecast by some of the most prominent figures within the cryptocurrency space, the scale and pace of the correction has caught many by surprise and only confirmed in the minds of sceptics the innate volatility of crypto assets. 

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The recent collapse of the UST stablecoin and Terra Luna cryptocurrency has only exacerbated this scepticism and amplified calls for greater regulation

CBDCs & Interest Rates

Lagarde compared what she described as unbacked cryptocurrencies to the digital euro, which the ECB is currently developing in cooperation with member states. 

She stated: “The day when we have the central bank digital currency, any digital euro, I will guarantee it. So the central bank will be behind it. I think that is vastly different from any of those things.”

With inflation in the Euro Zone reaching a record high due to a mixture of pandemic response spending, supply chain disruption and the war in Ukraine, Lagarde announced in a blog on Monday the ECB’s intention to end its eight-year experiment with negative interest rates. 

The president stated: “Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.”

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