Christine Lagarde, known for her softer stance on cryptocurrencies than other prominent figures in world finance, has asked the Economic and Monetary Affairs Committee of the European Parliament to consider the “wider social benefits” of digital currencies when it comes to regulating them, stating that a heavy-handed approach could stifle innovation and would not allow digital assets “space to develop.”
Digital Assets Can Bring “Public Good”
Lagarde, who will take over as European Central Bank (ECB) president in November, has long been a cautious proponent of digital currencies for some years, although she is always careful to balance the potential benefits they offer with the potential for an increase in illegal use in order to appease both ends of the spectrum. In an opening statement to the Economic and Monetary Affairs Committee discussing many facets of monetary policy, Lagarde, who earlier this year said that cryptocurrencies were “shaking the system”, states that “central banks and supervisors need to ensure the safety of the financial sector, but also to be open to the opportunities provided by change.” Citing digital currencies in particular she preaches a balanced approach to regulation:
In the case of new technologies – including digital currencies – that means being alert to risks in terms of financial stability, privacy or criminal activities, and ensuring appropriate regulation is in place to steer technology towards the public good.
Lagarde, the former Managing Director of the International Monetary Fund, first discussed cryptocurrencies in 2016 at the World Economic Forum in Davos, where she presented a report entitled “Virtual Currencies and Beyond”. The report praised the potential of digital currencies to improve on transaction costs and speeds. Her support for the technology, which has continued while the ecosystem as a whole has attracted increased criticism from governments, has enshrined Lagarde as a figurehead for crypto supporters, who will be hoping that her position as ECB president can help steer cryptocurrencies through this crucial period of imminent regulation.