The European Central Bank’s (ECB) president, Christine Lagarde, has blasted Bitcoin as a role facilitating “funny business” and “total reprehensible money-laundering activity”. She said she had no idea why cryptos had grown in popularity.
The ECB has been boosting the value of its own currency, the euro, and hiking interest rates to combat the high inflation that hit record highs this year. Its governing board has already raised its benchmark rate by a quarter percentage point this year, and markets expect a further 50 basis points hike for the next two policy meetings.
Earlier this month, Lagarde warned that the ECB might not be through raising rates to fight the high inflation that hit record levels in 2018. Inflation is at its highest in 19 years, and the ECB has not been satisfied with its progress.
She added: “It is clear that if we do not act now, we will be dealing with a situation where inflation will continue to rise, and that will damage the hard-won economic growth in the region.”
Lagarde also expressed concern that high inflation could destabilize the currency union. She told lawmakers the ECB is not satisfied with its 2% target for inflation, and should raise rates further to ensure inflation returns to the bank’s aim in a timely manner.
Her comments follow a dramatic decline in Bitcoin’s price this week and a spike in criminal activity on the dark web, where thousands of people trade drugs with cryptocurrencies. In addition, German police recently shut down the world’s largest illegal ‘Darknet’ marketplace, shutting down about half a million users who traded drugs and cryptocurrencies for cash.
The ECB has been pushing forward with its digital euro project since a year ago, but it is still not clear what kind of coins the ECB will ultimately create. It is focusing on creating a “digital settlement asset” that can be used in the wholesale payment market.
In this way, it can provide a monetary anchor that is trusted by EU citizens and will facilitate the transition to a digital economy. Rather than relying on private money to act as an anchor, the digital euro is designed to provide a stable monetary base for European payments that is both convenient and secure, according to the ECB blog post.
While the bank’s top officials are committed to developing a “digital euro,” they are also aware that their new approach will likely bring a certain amount of disruption to a society that has spent decades using cash for payments. This is especially true in light of the trend towards more electronic and convenient payments.
One of the reasons that the ECB is considering the development of its own currency is to ensure that payments are made safely, securely and transparently. This is why the ECB is also examining technologies to replace the current centralized, state-run system of settlement that relies on banknotes and cash for a large proportion of transactions.
