Crypto warning from ECB President Lagarde

The president of the European Central Bank (ECB), Christine Lagarde, recalled that the price of Bitcoin, the largest cryptocurrency, fell almost 75% in one year, and warned that systemic risk can easily arise due to the growing connection between the ecosystem of cryptocurrencies and the traditional financial system. system.

In her speech at the 6th European Systemic Risk Committee held in Frankfurt, Lagarde made assessments of the risks to Europe’s financial stability.

THE UNSTABLE ENVIRONMENT CREATES RISKS

Explaining that a series of strong shocks such as the Covid-19 epidemic, the Russia-Ukraine war and the energy crisis hit the world economy one after another, Lagarde said that this unstable environment poses great risks for financial stability in Europe.

Expressing that these risks are exacerbated by the weakening economic outlook, Lagarde also explained that monetary policy has been tightened to ensure that inflation returns to 2 percent in the medium term.

Stating that resilience is the “key” to help the financial system meet its goal of supporting the real economy, Lagarde said: “It is therefore crucial to ensure the continued resilience of our financial system and to support it where it is lacking. Policy Macroprudential management must be prepared for new challenges and adapt to change as necessary,” he made his comment.

ECB President Christine Lagarde said it is important for banks, which are at the heart of the European Union’s financial system, to set up adequate provisions and carry out prudent capital planning, and called on banks to be careful about the credit risk.

REGULATION SHOULD BE CAREFULLY CONSIDERED

Emphasizing that cryptocurrencies are highly volatile and pose significant risks to consumers, Lagarde asserted that policymakers should think carefully about how the crypto-asset ecosystem should be regulated.

Recalling that the price of Bitcoin, the largest cryptocurrency with blockchain technology, fell almost 75 percent in one year, Lagarde said: “Systemic risk can easily arise from the growing links between the crypto ecosystem and the traditional financial system.” . warned. (AA)