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ECB Chief Lagarde: Crypto And Defi Could Pose ‘Real Risks’ To Financial Stability

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ECB Chief Lagarde: Crypto And Defi Could Pose ‘Real Risks’ To Financial Stability

The president of the European Central Bank (ECB), Christine Lagarde, says crypto assets and decentralized finance (defi) have the potential to pose “real risks” to financial stability. She has some regulatory suggestions to supplement Europe’s Markets in Crypto Assets Regulation (MiCA) bill.

Lagarde on Crypto Regulation

ECB President Christine Lagarde talked about cryptocurrency regulation at the European Parliament’s Committee on Economic and Monetary Affairs hearing Monday. She said:

We believe, as we are embarking on this work concerning crypto assets and the risk that they pose, that crypto assets and decentralized finance (defi) have the potential to pose real risks to financial stability.

“This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified,” the ECB chief added.

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However, she noted: “For the moment, the links between the private sector crypto assets and traditional finance remain still limited — for the moment.”

Lagarde proceeded to talk about the Markets in Crypto Assets Regulation (MiCA) bill. She emphasized that the European Systemic Risk Board (ESRB), which she chairs, “supports the need for quick adoption and implementation” of MiCA.

The ECB chief noted that she is encouraged by the progress of MiCA. However, she added that to her understanding, it “will not be implemented until 2024,” which she stressed “is a long way away.”

Lagarde then suggested some additional provisions to the current MiCA bill. Referring to the MiCA bill with add-on provisions as MiCA2, she explained that MiCA2 “Should address the risk of interconnectedness with respect to financial institutions’ exposure to crypto assets.”

It should also “fully cover decentralized finance (defi)” and regulate crypto staking and lending activities, she said. The ECB boss noted that the current MiCA bill does not cover bitcoin but she hopes it will be covered in MiCA2.

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What do you think about the comments by ECB President Christine Lagarde? Let us know in the comments section below.

Kevin Helms

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Get Real, Lagarde — The Underlying Asset ‘Guaranteeing’ Your Euro Scam Coin Is A Gun

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Get Real, Lagarde — The Underlying Asset ‘Guaranteeing’ Your Euro Scam Coin Is A Gun

With the approaching tsunami of central bank digital currencies (CBDCs) looming ever closer, it shouldn’t come as a surprise when central banks shill their coins at the expense of sounder assets. Recently, European Central Bank president Christine Lagarde went so far as to say that cryptocurrency is “worth nothing.” According to Lagarde, crypto has “no underlying asset” like the upcoming digital euro. But fiat money’s secret source of value is the real explosive scandal.

‘Worthless’ Innovation

European Central Bank President Christine Lagarde recently remarked that crypto is “worth nothing” and needs to be regulated. Nevermind the humor in trying to regulate something worthless, or her failure to understand subjective value, but the once-convicted criminal Christine said something that was very interesting:

[With crypto] there is no underlying asset to act as an anchor of safety.

She was making this observation in comparison to the upcoming digital euro central bank digital currency (CBDC), and claimed that “any digital euro, I will guarantee — so the central bank will be behind it and I think it’s vastly different.”

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ECB President Christine Lagarde

This begs the question of what guarantees the value of the euro itself, or the U.S. dollar, or any fiat currency. As their worth is supposedly established by the decree of governments (groups of mere individuals just like you and me), what then is the “underlying asset” which gives these currencies their value? In the case of government money, the answer might blow you away.

Guns vs. Gold, Silver, and Cowry Shells

Gold is sought after for its beauty, rarity, and utility. Societies across time have valued it almost ubiquitously, so it naturally became a good means of exchange and store of value.

Cowry shells have also historically enjoyed great currency (pun intended), and thanks to their limited quantity, ease of transport and transfer, and basically uniform units, were employed similarly. I’ve written an op-ed before on the erroneous idea that money is primarily a creation of the state. Money naturally arises in any given society where trade is occurring, regardless of politics: Jack has a wagon wheel. I have butter. I need a wagon wheel. Jack doesn’t need butter. A problem. But if we both like and have gold, or cowry shells, or bitcoin to trade — hey, problem solved.

States historically debase and devalue money, as Austrian economist Friedrich Hayek notes above, inflating it and building unsustainable credit bubbles. An early example of this is the Roman Empire, with the state progressively lowering the silver content of the denarius until it was almost nil. A modern example is the current global inflation crisis, brought on by the reckless and virtually endless printing of money.

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Now, when a population is coerced into using certain monies at the forced exclusion of others they prefer, we are in the world of fiat, and there is effectively no (easy) escape from the bad money. Fiat means, literally, “by decree” — an arbitrary order. Merriam-Webster’s third definition of “fiat” contains an example that may be even more illustrative:

According to the Bible, the world was created by fiat.

Out of nothing. In the fiat world, central banks are God. Not just anybody can create money for market use. This privilege is afforded solely to the state. For a real life example of what this angry and vengeful god does when people freely try to make their own coinage or currencies, and use them against the will of the almighty, see here:

It does not matter how peaceful you are. It does not matter how beneficial to humanity your innovation or discovery is. If the money you create challenges the closed-market fiat hegemony, you will ultimately be presented with three basic options:

  1. Cease production and/or free use of your currency.
  2. Go to jail — or kill or be killed resisting being put in the cage.
  3. Find a “sly roundabout way,” to quote Hayek, to grow your economy and “introduce something they can’t stop.”

What I am driving at should be universally recognized, as obvious as it is. The underlying “value” of fiat money is guaranteed by a gun. By a legal monopoly on violence.

The reason inflationary and unsound fiat currencies like the euro remain dominant is because to use other, better currencies freely is forbidden. And when you’re from the holy pantheon of central bank elitists like Christine Lagarde, you simply cannot fail.

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Take it from her:

The European Central Bank can neither go bankrupt nor run out of money even if it were to suffer losses on the multi-trillion-euro pile of bonds bought under its stimulus programmes.

Market Accountability and Crypto Competition

Let’s contrast the violent nature of fiat models for money, were those pointing out problems with the law, or trying to keep their own money are violated, with more voluntary models.

In a free and open market, if I decide to make a horrible crypto scam coin and dupe millions out of money, I may make a buck or two, but market actors learn something. One, they learn never to trust or do business with me again — thus severely compromising my ability to thrive in a given society aware of my fraud, even as a rich man. Those I scammed are now unlikely to let me participate in their markets to fulfill my needs. And two, they’ve learned how to better identify and control for avoiding similar scams in the future.

With government money, however, the scam itself is baked right into the regulations. The creator of the scam coin is able to demand everyone abandon their preferred assets, and switch over to his sh*tcoin. You may want to laugh in his face, but you can’t. He’s literally got a gun to your head.

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Businesses everywhere are required by law to accept the government scam coin called fiat, and so in a complete lack of free market consequence, the scammers do whatever they want, and simply print more coins for themselves, devaluing the currency. All the while using this reckless printing to secure and hoard hard assets before the whole thing collapses.

Action Without Permission: The Escape From Fiscal Insanity

As purely peer-to-peer transactions are increasingly demonized in the mainstream media and so-called public discourse, private crypto transactions could come to be viewed just like the liberty dollar from the video above — illegal — with the scam coin creator (government) now having almost completely co-opted what started out as an experiment in freedom.

If this seems unrealistic or paranoid, keep in mind state-associated financial groups and central banks have already long been thinking about implementing measures to make non-custodial and unhosted crypto wallets illegal, as well as planning for the unified global regulation of bitcoin. As Lagarde said in early 2021:

It’s a matter that needs to be agreed at a global level, because if there is an escape, that escape will be used.

People definitely do want to escape the maniacal printing and debasement of monetary value. They want to escape being extorted to fund wars, and escape paying for the lavish lifestyles of legal criminals like Lagarde who suffer no consequences. The only way to stop this is through individual market action. Trading freely, en masse, regardless of what hypocrites in positions of illegitimate “authority” may say. Permissionless transactions at all levels — from grandiose purchases to tiny, everyday exchanges of value.

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There are many ways to make sure scams, violent acts, and other undesirable actions are mitigated and defended against even in so-called unregulated, decentralized, stateless economies. But the first recognition that must be made to establish this more peaceful, rational, actually desirable “new normal,” is that the fiat system of money is predicated on violence and intentional ineptitude.

If Lagarde’s central bank-based digital euro will indeed be superior to peer-to-peer permissionless cash, what’s she so concerned about? Let the market decide. There’s no need to bring guns into this.

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anarchy, Austrian Economics, Bitcoin, bubble, CBDC, Central Bank, Christine Lagarde, cowry shells, Digital Currency, ECB, Economic Freedom, European Central Bank, Federal Reserve, Fiat, Free Market, Friedrich Hayek, gold, Government, history of money, Libertarian, liberty dollar, p2p, Peer-to-peer, Ponzi Scheme, Printing money, Roman Empire, Scam, scamcoin, silver, Sound Money, violence, Voluntaryism

What are your thoughts on Lagarde’s recent statements about crypto? Let us know in the comments section below.

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Graham Smith

Graham Smith is an American expat living in Japan, and the founder of Voluntary Japan—an initiative dedicated to spreading the philosophies of unschooling, individual self-ownership, and economic freedom in the land of the rising sun.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Cryptocurrency Is ‘Based On Nothing,’ Should Be Regulated, ECB’s Lagarde Says

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Cryptocurrency Is ‘Based On Nothing,’ Should Be Regulated, ECB’s Lagarde Says

President of the European Central Bank Christine Lagarde has insisted that unlike a digital euro, cryptocurrency has no underlying asset. It should be regulated to prevent people from losing their life savings by speculating on crypto assets, the top ECB official has suggested.

Cryptocurrency Is ‘Worth Nothing,’ ECB Governor Claims

The head of the eurozone’s monetary authority, Christine Lagarde, maintains that cryptocurrencies are “based on nothing,” and is concerned about people “who have no understanding of the risks, who will lose it all and who will be terribly disappointed, which is why I believe that that should be regulated.”

Speaking to Dutch TV, Lagarde admitted she is skeptical about the value of crypto assets, as opposed to a central bank digital currency (CBDC) such as the digital euro, which the European Central Bank (ECB) is planning to issue within the next few years. Regarding cryptocurrency, she also stated:

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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.

The top ECB executive made the comments amid difficult times for crypto markets, when major coins like bitcoin (BTC) and ether (ETH) are down 50% from their peak prices in 2021, Bloomberg reported. Cryptocurrencies are also facing mounting pressure and increasing scrutiny from regulators around the world, often citing threats to the financial system.

“The day when we have the central bank digital currency out, any digital euro, I will guarantee — so the central bank will be behind it and I think it’s vastly different than many of those things,” Christine Lagarde elaborated. The governor noted she doesn’t hold any crypto assets but admitted one of her sons has invested in crypto against her advice and she follows them “very carefully.”

Lagarde’s statements also come after other ECB officials have already expressed similar concerns. In April, Executive Board Member Fabio Panetta ramped up the bank’s anti-crypto rhetoric, comparing the rise of crypto assets to the 2008 subprime mortgage crisis and the Wild West’s gold rush, while calling for global regulations.

More recently, Panetta said the digital euro could become a reality by 2026, setting a time frame for its launch. The project is currently in its investigation phase and as the ECB is now stepping up engagement with stakeholders, the realization phase could begin at the end of 2023.

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CBDC, Central Bank, Christine Lagarde, Crypto, crypto assets, crypto investments, Crypto markets, Cryptocurrencies, Cryptocurrency, Digital Currency, digital euro, ECB, Eurosystem, Eurozone, Governor, head, Lagarde, President, Regulation, Regulations

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What’s your opinion about the ECB’s stance on cryptocurrencies? Share your thoughts on the subject in the comments section below.

Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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ECB To Cease Bond Purchases In Q3, Lagarde Says EU’s Economic Rebound ‘Crucially Depends On How The Conflict Evolves’

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ECB To Cease Bond Purchases In Q3, Lagarde Says EU’s Economic Rebound ‘Crucially Depends On How The Conflict Evolves’

After the inflation rate in the eurozone reached a high of 7.5% in March, the European Central Bank (ECB) and the bank’s president Christine Lagarde explained on Thursday the central bank’s bond purchases will cease in Q3. Reiterating what she said at a press conference in Cyprus two weeks ago, Lagarde stressed on Thursday that inflation “will remain high over the coming months.”

European Central Bank Plans to End Asset Purchase Program in Q3

The eurozone is suffering from significant inflationary pressures as rising consumer prices are ravaging European Union (EU) residents. In March, data from the ECB had shown consumer prices skyrocketed to 7.5% and the ECB’s president Christine Lagarde expected energy prices to “stay higher for longer.” On April 14, members of the ECB met and then told the press that the central bank plans to cease its APP (asset purchase program) by the third quarter.

“At today’s meeting the Governing Council judged that the incoming data since its last meeting reinforce its expectation that net asset purchases under the APP should be concluded in the third quarter,” the ECB disclosed to the press. After the APP ends, the bank is expected to start hiking the benchmark bank rate. However, in Lagarde’s opinion, it will depend on what happens with the current Ukraine-Russia war.

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The EU’s economic improvement, Largade said “will crucially depend on how the conflict evolves, on the impact of current sanctions, and on possible further measures.” The central bank’s message on Thursday highlighted that benchmark bank rates won’t change until end of the APP. “Any adjustments to the key ECB interest rates will take place some time after the end of the Governing Council’s net purchases under the APP and will be gradual,” the ECB detailed in a statement.

Fidelity International Global Macroeconomist: ECB Faces a ‘Tough Policy Trade-off’

Following the ECB’s and Largade’s statements, the gold bug and economist Peter Schiff threw in his two cents on Twitter about the central bank keeping rates suppressed. “The ECB announced interest rates will stay at zero until it judges inflation will stabilize at 2% over the medium term,” Schiff tweeted. “Eurozone inflation is currently 7.5%. How will throwing more gasoline on a fire put it out? Europeans are stuck with inflation well above 2% indefinitely.” Schiff continued:

The dollar is rising against the euro because the Fed is still pretending it will fight inflation, while the ECB is still pretending inflation is transitory. Once both banks stop pretending the dollar will fall against the euro, but both currencies will collapse against gold.

Speaking with CNBC on Thursday, global macroeconomist at Fidelity International, Anna Stupnytska, said the European Central Bank faces a “tough policy trade-off.” “On the one hand, it is clear that the current policy stance in Europe, with interest rates still in the negative territory and the balance sheet still growing, is too easy for the high level of inflation which is becoming broader and more entrenched,” Stupnytska remarked after the ECB’s statements. The Fidelity International economist added:

On the other hand, however, the Euro area is facing a huge growth shock, simultaneously driven by both the war in Ukraine and China’s activity hit due to zero-COVID policy. High frequency data already point to a sharp hit to Euro area activity in March-April, with consumer-related indicators worryingly weak.

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7.5%, 7.5% inflation, Anna Stupnytska, App, Asset Purchase Program, Bond Purchases, Central Bank, Christine Lagarde, Covid, Dollar, ECB, ECB bond purchases, ECB’s president, EU, EU Inflation, Euro, European Central Bank, European Union, Fed, Fidelity International, global macroeconomist, gold, inflation, Inflation in Europe, Inflation in the EU, interest rates, Peter Schiff, rate hikes

What do you think about the ECB explaining that bond purchases will end in Q3 and the discussion concerning raising the benchmark bank rate? Let us know what you think about this subject in the comments section below.

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Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

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