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ECB President Christine Lagarde downplays any risks bitcoin and other cryptocurrencies could pose to financial stability and monetary sovereignty. In contrast, she sees stablecoins, such as Facebook-backed libra, as posing \u201cserious risks.\u201d<\/strong><\/p>\n The president of the European Central Bank (ECB), Christine Lagarde, shared her view on the future of money in an article published Monday in L\u2019ena hors les murs magazine. She specifically discussed \u201cbitcoin or other crypto-assets that have been trying to gain a foothold in the digital payments space and to anchor trust in their technology.\u201d<\/p>\n Lagarde began by stating that innovations like blockchain technology \u201cbring both new opportunities and new risks.\u201d She noted that peer-to-peer (P2P) transactions have \u201cno need for a trusted third-party intermediary,\u201d asserting that the trust \u201cis replaced by cryptographic proofs and the security and integrity of records is ensured by DLT, which avoids the \u2018double-spending\u2019 problem.\u201d The ECB chief elaborated:<\/p>\n The main risk lies in relying purely on technology and the flawed concept of there being no identifiable issuer or claim. This also means that users cannot rely on crypto-assets maintaining a stable value: they are highly volatile, illiquid and speculative, and so do not fulfil all the functions of money.<\/p>\n<\/blockquote>\n Lagarde proceeded to point out that unlike bitcoin, stablecoins \u201cpose serious risks,\u201d even though they \u201ccould drive additional innovation in payments and be well integrated into social media, trade and other platforms.\u201d She explained that stablecoins \u201ctry to solve crypto-assets\u2019 problem of a lack of stability and trust by pegging their assets to stable and trusted fiat money issued by States.\u201d<\/p>\n In addition, the issuers of \u201cglobal\u201d stablecoins, \u201caim to introduce their own payment schemes and clearing and settlement arrangements.\u201d Global stablecoins are stablecoins that are likely to achieve mass adoption from inception, such as Facebook-backed libra<\/a>.<\/p>\n The ECB chief warned that if these global stablecoins are widely adopted, \u201cthey could threaten financial stability and monetary sovereignty.\u201d For instance, she explained: \u201cif the issuer cannot guarantee a fixed value or if they are perceived as being incapable of absorbing losses, a run could occur. Additionally, using stablecoins as a store of value could trigger a large shift of bank deposits to stablecoins, which may have an impact on banks\u2019 operations and the transmission of monetary policy.\u201d<\/p>\n<\/p>\n Moreover, Lagarde believes that stablecoins backed by global tech firms \u201ccould also present risks to competitiveness and technological autonomy in Europe, as they would attempt to leverage their competitive advantage and control of large platforms,\u201d adding:<\/p>\n Their dominant positions may harm competition and consumer choice, and raise concerns over data privacy and the misuse of personal information.<\/p>\n<\/blockquote>\n Former Goldman Sachs hedge fund manager Raoul Pal commented on Lagarde\u2019s view, tweeting: \u201cthe fear is real and it\u2019s stablecoins they see as the threat, not bitcoin.\u201d<\/p>\n What do you think about Lagarde\u2019s view on bitcoin and stablecoins? Let us know in the comments section below.<\/strong><\/em><\/p>\n The post ECB Chief Christine Lagarde Downplays Bitcoin\u2019s Risks to Financial Stability, Troubled by Stablecoins<\/a> appeared first on Bitcoin News<\/a>.<\/p>\nChristine Lagarde, Bitcoin, and Facebook\u2019s Libra<\/h2>\n
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