What Does the New ECB Appointment Mean for Crypto Regulation?
The European Central Bank (ECB) recently approved the appointment of its new President, Christine Lagarde. While the approval itself is not binding, it acts as a recommendation to the European Council who will vote on the appointment in October.
This appointment may suggest a pivot in the ECB’s position on cryptocurrencies, such as Bitcoin ($BTC), who so far consider them to be of little impact on European financial markets, as well as deem them not to be under the ECB’s jurisdiction, as summarized by their research published in May 2019:
“… crypto-assets’ risks or potential implications are limited and/or manageable on the basis of the existing regulatory and oversight frameworks.”
What is the ECB?
The ECB is responsible for handling monetary policy for the 19 countries within Europe that have adopted the euro.
The current president of the ECB, Mario Draghi, believes regulation of crypto lies in the hands of consumer protection agencies. Draghi stated in May 2019:
“They [cryptocurrencies] are not significant enough…that they could affect our economies in a macro way. And so we tend to consider them as speculative assets — highly risky — but as far as the rest is concerned, it’s not really something that pertains to the central bank, the task of monitoring and regulating, possibly, this.”
Who is Christine Lagarde?
Lagarde served as head of the International Monetary Fund (IMF) until her resignation on September 12 2019. She is regarded as one of the world’s most powerful financial executives, though she is not without a history of scandal.
Compared with her predecessor, Lagarde appears to embrace both the inevitably of crypto regulation and the potential opportunities presented afforded by digital currencies, stating in a September 2019 IMF news release:
”In the case of new technologies — including digital currencies — that means being alert to risks in terms of financial stability, privacy or criminal activities, and ensuring appropriate regulation is in place to steer technology towards the public good. But it also means recognizing the wider social benefits from innovation and allowing them space to develop.”
Lagarde has been consistent in her position that digital currencies will have far reaching adoption and implications. As far back as October 2016 she noted how she sees banks adopting digital currencies within 5 years, along with the regulation required to combat fraud and money laundering:
“I would be very surprised that if, in 5 years time, many of the existing financial institutions have not adopted those tools.”
Lagarde even spoke in October 2018 on the possibility of the IMF adopting its own cryptocurrency. In light of leaving the IMF, it is to be seen whether that sentiment remains at the IMF, and whether she brings a similar position to the ECB.
Nonetheless, until Lagarde takes over as president on November 1 2019 (assuming she does), while most indications suggest she will push towards regulation, we can little more than speculate on the extent to which she deems it to be part of the ECB’s oversight, as well as what action, if any, they will look to take.
