ECB president declares cryptocurrencies “worth nothing”

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It’s disappointing to see ECB President Christine Lagarde declare cryptocurrencies “worth nothing” on Dutch television last Sunday. I thought we had passed that point. Sure, a big chunk of the market is probably worth nothing, but seeing the head of the central bank publicly declare that all cryptocurrencies are worthless in such an understatement is out of this world. “My humble assessment is that (cryptocurrency) is worth nothing. It is based on nothing, there are no underlying resources to act as a safety anchor, ”she said. While you may be right that there are no underlying assets in many of these currencies, you don’t get the point. Network effects alone can make it a valuable asset, too. if there is no physical value underneath. As much as that sentence reads as the definition of a Ponzi scheme, it is not. Ethereum, for example, may not be physically backed up by anything, but it has built-in apps that offer utilities, as well as millions of users running the network every day. This is the value. As for Bitcoin, the multi-billion dollar infrastructure that has built around it, its place in corporate balance sheets (Tesla, MicroStrategy etc.), its legal tender (El Salvador, Central African Republic, Lugano in Switzerland, Madeira) and the growing development of institutional interest further increases the belief that just because something does not have physical support does not mean that it has no value. For put it another way: it is the same reason why euro coins are not worthless even if they have no physical value. The euro has value because we trust the ECB will honor it. This has nothing to do with cryptocurrency, of course, but it’s another point that shows physical media isn’t a prerequisite for value. My complaints about his recent comments don’t end here. He refused to admit the real reasons for the inflation, arguing to Bloomberg that it is all about supply. The huge money press that the Eurozone has seen cannot be blotted out as “irrelevant.” It’s a claim that screeches in the midst of a cost-of-living crisis worsening by the day day. As a young man who left the Eurozone to live in South America in part for these reasons, it leaves a bitter taste to see the head of our Central Bank say this. The project was also discussed. of digital euro. Lagarde says the project, which could be built within four years, is distinct from cryptocurrency in that it will be backed by the ECB and therefore will have value. The concept of a euro CBDC is certainly intriguing, although steeped in risk. Is a central authority that has complete control over our spending a good thing? The ability to see what’s in each wallet, who is spending what for which assets, the power to freeze assets at will, etc. There are obviously many questions that need to be gently answered as we embrace the revolutionary technology that is blockchain. A CBDC could certainly have advantages, but if implemented incorrectly it could also paint a rather dystopian picture. Only time will tell.

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