Mario Draghi, the President of the European Central Bank, has implied the euro is not an asset, but only a currency.
“Bitcoin and cryptocurrency, or anything that looks like it, are not really currencies, they are assets,” Draghi said.
“Today, tomorrow, in a month, it will always be a euro and the European Central Bank is behind the euro.”
Well, hopefully. One Venezuelan Bolivar was one Venezuelan Bolivar as well until they diluted it to nothing. Interesting, however, the president thinks he is behind the euro. Not the European economy or the European people, but some unelected bureaucrats who claim independence to do whatever they like with our money.
“Who is behind the cryptocurrency? These are very risky assets whose value, as you have seen, can oscillate wildly,” he said.
Well, behind the cryptocurrency is the code, and its rules. It is also the people generally: whoever wants to run the nodes.
Behind bitcoin you can also find the vast hardware which transforms energy into enforceable code. That ensures a bureaucrat can’t dilute money through a game of interest rates and outright printing that conceptually is very much a pyramid scheme because all fiat money is created through loans which can only be repaid back if more money is created ad infinitum at an ever growing scale.
A new theory is now rising which argues interest rates should be fixed at 0%. That would give all power in money creation to the government, which can have its own problems, but the Modern Monetary Theory might at least get people like Draghi and other central banks to explain what role interest plays in the current monetary system.
Bitcoin and cryptos in general “are not significant enough to affect our economies,” Draghi said. By that he presumably means bitcoin has not replaced the euro to the point Draghi and others can’t affect economies through their machinations of raising or lowering interest rates or outright printing. He further said:
“We tend to consider them as highly risky speculative assets but their monitoring and regulation does not concern the Central Bank. It’s more about consumer protection because we want to make sure that people who buy these assets know what they are doing and are aware of the risks they are taking.”
He means the central bank has no authority or jurisdiction over cryptos. No one really does, but where say a scam is perpetrated through cryptos or where there is theft and so on, there are general laws that apply.
For consumer protection, they might be useful where the intention is to use it as just an investment. Cryptos are however a currency too and they do act as a currency although to a limited extent. That can have considerable benefits for the economy as access to online commerce for example is increased or value is transferred more quickly or as crypto accounts can provide banking like facilities.
Consumer protection, therefore, needs to be mindful of not becoming consumer stifling as arguably access to stocks and the stock market has become.
But this re-statement that the European Central Bank has no jurisdiction over bitcoin is welcomed news especially for Indian cryptonians who can point to more advanced economies in their criticisms of the Indian Central Bank which has implemented a crypto banking blockade.