Future of Cryptocurrency in Europe Post-Lagarde
The President of the European Central Bank, Christine Lagarde, is expected to resign before the upcoming French presidential elections.
During her tenure, Lagarde has overseen discussions surrounding the Markets in Crypto Assets (MiCA) legislation, which has significantly shaped the cryptocurrency landscape within the European Union. She also initiated the work on a digital euro, which is seen as the next step for the Eurozone’s currency.
However, significant work remains to fully establish a cohesive crypto policy in Europe. As it currently stands, MiCA does not regulate decentralized finance (DeFi), and there is still deliberation regarding the specifics of the digital euro.
Lagarde’s Cautious Stance on Crypto
Lagarde has exhibited skepticism towards cryptocurrencies, as evidenced by her statement in 2022 where she claimed, “My very humble assessment is that it is worth nothing.” Translation: My very humble assessment is that it is worth nothing.
She emphasized the need for regulation, warning that investors might not comprehend the risks involved in crypto investments and could possibly “lose it all.”
Her perspective laid the groundwork for the ECB’s involvement in shaping MiCA. While the ECB does not craft laws, it provided guidance and input during the legislative process.
Even post-MiCA, Lagarde has continued to advocate for stringent regulations concerning stablecoins, urging European lawmakers to implement protective measures to prevent risks associated with stablecoin runs. Translation: European legislation should ensure that such schemes cannot operate in the EU unless supported by robust equivalence regimes in other jurisdictions and safeguards relating to the transfer of assets between the EU and non-EU entities.
The Demand for Digital Cash
Despite her skepticism, Lagarde conceded the rising demand for digital currencies, stating in 2021, “If customers prefer to use digital currencies rather than have banknotes and cash available, it should be available.” Translation: If customers prefer to use digital currencies rather than have banknotes and cash available, it should be available.
The ECB’s investigation into a digital euro began in October 2021, and while progress has been slow, the ECB is keen on ensuring that the digital euro respects privacy standards, promising that it will maintain the advantages that cash offers.
New Leadership on the Horizon
Lagarde’s resignation comes at a politically delicate moment, which may impact the ECB’s future direction. France, being a significant player in the EU economy, will have a substantial voice in choosing her successor. Current frontrunners include Pablo Hernández de Cos and Klaas Knot, both of whom have articulated caution regarding cryptocurrencies and advocate for a measured regulatory approach.
This leadership transition will be crucial in determining how crypto policies evolve in Europe moving forward. As history shows, a comprehensive framework can be established without overly embracing crypto-friendly stances.
