According to Lagarde, the growth of cryptocurrencies has the ability to hinder the role of central banks to act as an ‘anchor’ of the economy while warning that digital assets can lead to the free banking era. She noted that banks need to be involved in matters related to experimenting with digital banking solutions while pushing for lenders to respond to the demand for digital payments to sustain the anchor role. She added:
Lagarde’s crypto criticism
The ECB boss, who was speaking in a panel discussion about digital finance, has since been a critic of cryptocurrencies, noting that they have no value. The session was also attended by Federal Reserve Chair Jerome Powell, who delved into developing a central bank digital currency (CBDC) while highlighting that the product would not be anonymous. He shared four ideal characteristics of a possible CBDC. Powell stressed that a possible CBDC needs to balance privacy protection with identity verification, similar to the current traditional banking system. Notably, most jurisdictions are pushing for the regulation of cryptocurrencies in a bid to curb the growth of private digital assets. In this case, the focus has been placed on rolling out CBDCs to counter the growth of assets like Bitcoin (BTC).
