It is unfortunate that ECB President Christine Lagarde declared on Dutch TV last Sunday that cryptocurrencies are “worth nothing”.
I thought we were past that point. Sure, most markets are likely worth nothing, but having the president of a central bank publicly declare all cryptocurrencies worthless feels increasingly far-fetched. You can
“My very humble assessment is that[cryptocurrency]is worth nothing. She may be right in saying that many of these currencies have no underlying assets, but she misses the point.
Network effects alone can add value to an asset without having any physical value underneath it. That sentence reads like the definition of a Ponzi scheme, but it’s not. Ethereum, for example, may be physically backed by nothing, but apps are built on top of it to provide utility, and millions of users operate the network every day. is worth it.
When it comes to Bitcoin, multi-billion dollar infrastructure has been built, corporate balance sheets (Tesla, MicroStrategy, etc.), fiat currency status (El Salvador, Central African Republic, Lugano in Switzerland, Madeira), and growth Interest further softens the belief that the lack of a physical backing for an institution does not necessarily mean that it is worthless.
Put another way; for the same reason that euro coins are worthless without physical value. The euro is valuable because we trust the ECB to respect it. Of course, this has nothing to do with cryptocurrencies, but it is another point that physical backing is not a prerequisite for value.
My complaints about her recent comments don’t end there. She refused to acknowledge the real reason for the inflation and insisted to Bloomberg that it was entirely supply-side focused. I can not do it.
In the midst of a cost of living crisis that is worsening by the day, this is a jarring statement. Watching it leaves a sour taste in your mouth.
The Digital Europroject was also discussed. Lagarde said the project, which he said could be launched within four years, is different from cryptocurrencies in that it will bring value with the backing of the ECB.
The Euro CBDC concept is certainly interesting, but it comes with risks. Is it good for a central authority to have full control over our spending? See what’s in every wallet, who’s spending what on what goods, the power to freeze assets at will, etc. ability. There are clearly many questions here that need to be answered delicately as we embrace revolutionary technology. That’s blockchain. CBDC certainly has its benefits, but it can also paint a pretty dystopian picture if implemented incorrectly.
Time will tell.
