ECB, Fed: When the dinosaurs of finance try to understand crypto

The Banque de France yesterday organized a conference on “financial tokenization” to examine cryptocurrencies, the status of decentralized finance (DeFi) and possible regulations. US Federal Reserve Chairman Jerome Powell and European Central Bank (ECB) President Christine Lagarde were both invited to attend.

The almighty in discussion

On Tuesday, central bankers gathered at the Louvre to discuss innovation and regulation but above all the crypto ecosystem.

Alexandre Stachchenko, co-founder of Blockchain Partner and director of blockchain and cryptocurrency at KPMG France, who attended the conference as an observer, made a tongue-in-cheek tweet about the conference, followed by a certain number of comments from the “ecosystem”: “Some still wonder what the metaverse looks like. I can now answer it: at a conference of central bankers on cryptos.”

When central bank officials met to discuss cryptocurrencies, no one from the industry was present to bring a contradictory view. Only Hadrien Zerah, CEO of Nomadic Labs, can be seen as such, but his company is experimenting with a central bank digital currency with the Banque de France.

One of the angles of attack is decentralized finance. Agustín Carstens, President of the Bank for International Settlements (BIS), highlighted the lack of regulation in the sector. “DeFi applications facilitate borrowing, lending and trading, but intermediaries are also exposed to traditional risks like liquidity, counterparty risk, leverage risk, and DeFi has no infrastructure in place to handle this. »

Jerome Powell and Christine Lagarde also agree on the dangers of decentralized finance. The ECB President specifically mentioned the impact of the Terra event.

“This tool is now accepted by the PayPal, MasterCard and Visa of this world, and abuse has taken place – be it Terra or Luna – and certainly by Mr. Do Kwon, who is currently at large. »

Do not be overtaken by this technology

Christine Lagarde and Jerome Powell acknowledged in their presentations that the explosive growth of the cryptocurrency industry carries a real risk of being overtaken by central banks. “The world was taken by surprise. […] We are now at the stage where between 10 and 15% of Americans and Europeans have actually invested in cryptos in 2021.”

“The aim of the conference was to show that the presidents of the largest central banks were aligned on the subject of cryptocurrencies, their supervision, and ready to coordinate on a global subject in essence”, explains to BFM Crypto Alexandre Stachchenko, co-founder of Blockchain Partner and Blockchain and Crypto Director at KPMG France.

It is in this capacity that the President of the Banque de France, François Villeroy de Galhau, called for international coordination to regulate cryptocurrencies. He also wants to implement MiCa regulations (for crypto-asset markets) by March next year.

A significant part, which testifies to the enthusiasm for these new assets. Assets are the key word because Jérôme Powell, like Christine Lagarde, refuses to call them “currency”.

Jerome Powell shared the same idea, acknowledging that “some of these crypto activities are similar to traditional financial activities”. However, although they seemed a little worried, the two leaders explained to us the need to stay up to date so as not to be overwhelmed by these new systems.

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ECB, Fed: When the dinosaurs of finance try to understand crypto


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