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European Central Bank ramps up efforts to regulate crypto

Photo of: Joseph Stone
by Joseph Stone

The president of the ECB participates in a reflection to regulate crypto-actives. However, this future regulation would only apply to digital currencies.

Even Christine Lagarde, the president of the ECB, cannot escape the subject of Bitcoin. During an interview on BFM Business, the director had the opportunity to express her position regarding crypto-assets.

And for the latter, there is no doubt that Bitcoin can in no way be equated with currency. However, the first of the cryptocurrencies is not the only one in this case. Christine Lagarde broadens the spectrum.

“It is not a currency. Cryptocurrency is not a currency. It’s a highly speculative asset,” the president of the European Central Bank told our colleagues.

These assets should therefore escape the current thinking of financial regulators. Indeed, Lagarde indicates that she is participating in a regulation project on crypto-assets. However, she specifies that this would apply to those that are similar to a currency.

By refusing Bitcoin the status of a currency, she would therefore exclude it from a future regulatory framework. Nothing is less certain, however. Last month, the head of the ECB suggested that Bitcoin should be regulated.

Bitcoin “is a highly speculative asset, which has conducted some bizarre business and some interesting and totally reprehensible money-laundering activities,” she told the Reuters Next conference.

However, the director of the central bank now seems to want to focus primarily on private digital currencies. And to cite the example of the Diem, Facebook’s digital currency formerly known as Libra. The regulation would therefore focus primarily on the stablecoins.

“It is imperative that, if an activity is conducted by a private actor, this activity, if it resembles currency, must be subject to exactly the same rules, exactly the same ratios, exactly the same supervision mechanisms,” Lagarde defends.

Are Bitcoin, Ether and other investment cryptocurrencies nevertheless protected from the authorities’ wishes? A case to follow. Christine Lagarde underlines the need to protect individuals.

“What is needed is simply that consumers are never defrauded and that they are fully informed of the nature of the risk they are taking. If they buy Bitcoin, it’s a speculative asset,” she says.

The president of the ECB once again cited the use made of cryptocurrencies in the financing of illegal activities on the “dark web”.