Another central banker criticizes cryptocurrencies: why do they hate them so much?

Another central banker criticizes cryptocurrencies: why do they hate them so much? - 2019 02 new virtual money concept gold bitcoins is digital cryptocurrency use picture id919509810The current price of a Bitcoin is still just over $ 30.000, but the President of the European Central Bank Christine Lagarde believes that this and other crypto assets are "worthless".

In an interview with Dutch TV on May 22, Lagarde said she has always argued that cryptocurrencies are "highly speculative and very risky assets". The speculative part is well known, but the banker then declared:

“My humble assessment is that they are worth nothing. It is not based on anything, there is no underlying asset that acts as a safety anchor ”.

Why central banks despise cryptocurrencies

There are several reasons why central banks and their leaders are vehemently opposed to cryptocurrencies. Decentralized digital assets compete with their plans to launch central bank digital currencies (CBDCs). Lagarde confirmed this in the following statement.

“The day we have the central bank's digital currency, any digital euro, I will guarantee it. So the central bank will be by your side. I think this is very different from anything else ”.

A CBDC will be fully controlled by the central bank. Being based on a blockchain, all transactions will be traceable, so banks will have even tighter control over citizens' finances than they already have. Banks cannot control cryptocurrency, which is why they are doing everything they can to try and eliminate it.

Furthermore, a bank's job is to profit from the money deposited by its customers. They operate on a fractional reserve system, which means that banks lend and invest the money deposited by their customers, leaving only part of it as a reserve in the bank. If everyone went to the bank on the same day to withdraw, the bank would collapse because the funds are not physically present.

This is exactly what Satoshi Nakamoto warned against when he created Bitcoin in the wake of the 2008 financial crisis, which was essentially caused by banks. The cycle repeats itself, with rampant inflation ravaging the world and central banks printing more money in the name of stimulus packages that actually devalue only the underlying currency.

So, in response to the global economic crisis, bankers have once again upped their anti-crypto rhetoric. Earlier this year, Lagarde and the ECB called for tighter controls on cryptocurrencies, this time citing avoiding sanctions as an excuse.

The cryptocurrency markets are cyclical

A massive collapse of the cryptocurrency market is nothing new: it happened in 2018 and before that in 2014, when BTC lost more than 80% of its value before recovering and reaching a new all-time high a year or two later.

The 2022 cryptocurrency bear market was expected, so this wave of FUDs from mainstream media, politicians and bankers is largely unwarranted.

Cryptocurrency markets are currently down 56% from their November 2021 peak of just over $ 3.000 trillion, so there may still be a long way to go before we hit the bottom of this current cycle.