Bitcoin and cryptocurrencies have exploded in value over the past year, making the combined crypto market worth a staggering $2.1 trillion.
The bitcoin price, peaking at almost $65,000 per bitcoin in April after a blistering six-month rally, has settled at around $50,000—for now. Meanwhile, the ethereum price has soared even further, boosting the price of many of its newer rivals.
Now, amid a surge of interest in smaller cryptocurrencies such as cardano, Binance’s BNB, Ripple’s XRP, solana and dogecoin, European Central Bank (ECB) president Christine Lagarde has warned cryptocurrencies aren’t currencies and should be treated as “highly speculative” and “suspicious.”
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“I think we have to distinguish between cryptos that are those highly speculative, suspicious occasionally, and high intensity in terms of energy consumption assets, but they’re not a currency,” said Lagarde, speaking on a Bloomberg podcast. “Cryptos are not currencies, full stop. Cryptos are highly speculative assets that claim their fame as currency, possibly, but they’re not. They are not.”
Alongside bitcoin’s huge rally, ethereum, cardano, Binance’s BNB, Ripple’s XRP, solana and dogecoin have all made triple-digit percentage gains this past year as investors bet the digital tokens will continue to appreciate in value amid rising adoption. Bitcoin, the most valuable cryptocurrency by a considerable margin, is now being used as both a currency and store of value, with El Salvador recently making bitcoin its official currency alongside the U.S. dollar.
However, Lagarde went on to praise stablecoins—cryptocurrencies like tether that are tied to traditional currencies or real-world assets—and central bank digital currencies (CBDCs).
“You have those stablecoins that are beginning to proliferate, which some big techs are trying to promote and push along the way, which are a different animal and need to be regulated, where there has to be oversight that corresponds to the business that they’re actually conducting, irrespective of how they name themselves,” Lagarde said.
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Governments and central banks around the world, most importantly in the U.S. and China, are beginning to experiment with CBDCs. Under Lagarde, the ECB this year launched a digital euro project, designed as a response to private-sector digital currencies such as bitcoin and Facebook’s proposed diem stablecoin.
“And in all that you have the central banks who are prompted by a demand of customers to produce something that will make the central bank and central bank digital currencies fit for the century we are in,” Lagarde said, adding: “I was keen to push the issue, the CBDC issue, on our agenda because I believe that we have to stand ready for that.”
In 2019, Lagarde warned that cryptocurrencies are “shaking the system”—cautioning that too much shaking could cost “the stability that is needed.”