When markets are in freefall, it’s difficult to escape fear, uncertainty, and doubt (FUD), so another central banker slamming digital assets isn’t surprising. It begs the issue of why banks despite cryptocurrency so much.
Although Bitcoin’s current price is just over $30,000, European Central Bank President Christine Lagarde believes it and other crypto assets are “worthless.”
In a May 22 interview with Dutch television, Lagarde said that cryptos have always been “very speculative, extremely dangerous investments.” The bit about speculation is well-known, but the banker went on to say:
“In my honest opinion, it is completely worthless.” It is founded on nothing, and there are no underlying assets to provide as a safety net.”
Why Do Central Banks Hate Crypto?
There are a number of reasons why central banks and their executives are so opposed to cryptocurrency. Their efforts to roll out central bank digital currencies clash with decentralized digital assets (CBDCs). In a subsequent statement, Lagarde confirmed this.
“I will guarantee it when we have a central bank digital currency, any digital euro.” As a result, the central bank will support it. That, I believe, is radically different from any of them.”
The central bank will have complete power over a CBDC. All transactions will be traceable thanks to the blockchain, giving banks an even greater grip over people’s money than they now have. Banks cannot control cryptocurrency, which is why they are making every effort to get it banned.
A bank’s job is also to profit from the money its clients deposit. They use a fractional reserve system, which means the banks lend out and invest the money their clients deposit, leaving just a small portion as a reserve. Because the monies are not physically present, the bank would collapse if everyone went to the bank on the same day to withdraw.
Satoshi Nakamoto cautioned against this when he invented Bitcoin in the aftermath of the 2008 financial crisis, which was mostly caused by banks. The cycle is repeating itself, with global inflation wreaking havoc on economies and central banks printing more money in the guise of stimulus packages that only serve to depreciate the underlying currency.
As a result of the global economic crisis, bankers’ anti-crypto rhetoric has increased again again. Lagarde and the ECB asked for stronger crypto regulations earlier this year, citing sanctions evasion as a pretext this time.
Cryptocurrency Markets Fluctuate
A major crypto market meltdown is nothing new; it occurred in 2018 and before that in 2014, when BTC lost almost 80% of its value before rebounding and setting a new all-time high a year or two later.
This surge of mainstream media, policymaker, and banker FUD about the crypto bear market of 2022 was mainly baseless.
Crypto markets are already down 56% from their November 2021 top of just over $3 trillion, indicating that there may be further downside before the current cycle comes to an end.