Bitcoin is the evil spawn of the financial crisis, according to European Central Bank (ECB) Executive Board member, Benoit Coeure.
Speaking at the Bank for International Settlements in Basel, he argued that the cryptocurrency “was an extremely clever idea. Sadly, not every clever idea is a good idea…Few remember that Satoshi embedded the genesis block with a Times headline from January 2009 about UK banks’ bailout.”
He also flagged up that BIS head Agustin Carstens was on his side, having said that Bitcoin is “a combination of a bubble, a Ponzi scheme and an environmental disaster.”
Coeure made his comments a day after International Monetary Fund Managing Director Christine Lagarde put forward the case for central bank digital currencies.
In a speech at the Singapore FinTech Festival, she observed that some are suggesting the state should back down. Providers of e-money argue that they are less risky than banks, because they do not lend money. Instead, they hold client funds in custodian accounts, and simply settle payments within their networks.
For their part, cryptocurrencies seek to anchor trust in technology. So long as they are transparent, and if you are tech savvy, you might trust their services, she commented. “Still, I am not entirely convinced. Proper regulation of these entities will remain a pillar of trust. Should we go further? Beyond regulation, should the state remain an active player in the market for money? Should it fill the void left by the retreat of cash?”
More specifically, should central banks issue a new digital form of money? This could be a state-backed token, or perhaps an account held directly at the central bank, available to people and firms for retail payments. “True, your deposits in commercial banks are already digital. But a digital currency would be a liability of the state, like cash today, not of a private firm.”
Various central banks around the world are seriously considering these ideas, including Canada, China, Sweden, and Uruguay. “They are embracing change and new thinking, as indeed is the IMF.”
Pros and cons
Lagarde’s speech coincided with the IMF releasing a new paper on the pros and cons of central bank digital currency, focusing on domestic, not cross-border effects.
“I believe we should consider the possibility to issue digital currency. There may be a role for the state to supply money to the digital economy. This currency could satisfy public policy goals, such as financial inclusion, and security and consumer protection; and to provide what the private sector cannot, privacy in payments,” Lagarde said.