Christine Lagarde on Bitcoin: “If there is an escape, that escape will be used.”

Christine Lagarde, the President of the European Central Bank (ECB), is an influential figure in the world of finance. 

With a career spanning from her time as the French Finance Minister to her tenure as the Managing Director of the International Monetary Fund (IMF), Lagarde has been at the forefront of global economic policy for years. 

But what does Christine Lagarde think of Bitcoin? 

Well, to put it lightly, she’s not exactly a fan. Her overall opinion of Bitcoin can be described as a mixture of scepticism, concern, and perhaps even a touch of disdain. 

Christine Lagarde has been quite vocal in her criticism of Bitcoin, citing its loose association with illegal activities, its roller-coaster price volatility, and its conspicuous lack of regulation. 

Lagarde is seemingly immune to the countless advantages offered by decentralization and transparency that have captivated so many. Yet, interestingly, she is a proponent of a European digital currency – the digital Euro.

Although the central bank digital currency (CBDC) isn’t synonymous with Bitcoin, it is crucial when considering just why this eminent economist has consistently expressed such contempt for Bitcoin both in the past and the present. 

What Does Christine Lagarde Think About Bitcoin?

The ECB president tends to be somewhat circumspect when publicly discussing Bitcoin, and on the rare occasions she does address Bitcoin, her comments are far from supportive or praiseful.

Lagarde recently fell prey to a video call prank orchestrated by impersonators posing as Ukrainian President Volodymyr Zelenskyy. 

During the call, she inadvertently shared information about the impending decision on the digital Euro. When the prankster inquired specifically about Bitcoin, Lagarde opined that anonymous transactions were dangerous, as they had funded terrorist attacks in France. 

When underpinning the comments about anonymous transactions, Lagarde remarked:

“we could have a mechanism where there is zero control. But that could be dangerous.” 

Here, we see the mask come off and the real issue that most leaders have with bitcoin, in that it lacks the control they desire. They can’t control monetary policy, they can’t control ownership, and they can’t control peer-2-peer transactions.

Again, it’s important to underscore that the digital Euro is not at all representative of Bitcoin, neither in terms of technology nor functionality. However, the attitudes towards Bitcoin seem to be influenced by this mindset.

In an interview with Reuters in 2021, Lagarde commented on her perceived potential malicious use of Bitcoin, stating:

“[Bitcoin] is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity”.

Lagarde also called for global regulation of Bitcoin, a sentiment that she has displayed on many occasions:

“There has to be regulation. This has to be applied and agreed upon … at a global level because if there is an escape, that escape will be used.”

It’s no secret that Lagarde doesn’t consider Bitcoin to be a real currency, in a phone conference call with The Economist, she expressed in crystal clear language that Bitcoin would not be held by any central bank:

“It’s very unlikely — I would say it’s out of the question.”

In 2022, Lagarde appeared on Dutch television and made comparisons between the proposed digital Euro and Bitcoin, stating: 

“My very humble assessment is that it is worth nothing, it is based on nothing, there is no underlying asset to act as an anchor of safety.”

“The day when we have the central bank digital currency out, any digital euro, I will guarantee – so the central bank will behind it and I think it’s vastly different than many of those things.” 

Lagarde also remarked that she herself does not hold any Bitcoin as she practices what she preaches, but follows it “very carefully.” 

In an interview headed by Dutch Students, Lagarde expressed the same old sentiment regarding the strict regulation of Bitcoin in order to “protect people.”

“What I’m really concerned about when it comes to crypto assets is that those investments be made by people who have their eyes wide open about the fact that they can lose it all.”

She also stated that people who invest in or use Bitcoin have “no understanding of the risks, who will lose it all, and who will be terribly disappointed, which is why I believe that that should be regulated.” 

While delving into Lagarde’s history and considering the idea that any exposure to Bitcoin could potentially boost its visibility, a statement from 2017 emerged, dating back to her tenure as the head of the International Monetary Fund (IMF). 

While referring specifically to Bitcoin and FinTech, Lagarde made a comment that Bitcoiners can wholeheartedly concur with:

“…it may not be wise to dismiss virtual currencies.”

Bitcoin, Currencies, And CBDCs

Lagarde’s views wield considerable influence in shaping mainstream perspectives on economic matters. Therefore, it’s essential to examine her opinions and open dialogue as they pertain to Bitcoin.

Digital Assets: Bitcoin & CBDCs

It’s easy to understand why people often confuse the fundamental differences between Bitcoin and Central Bank Digital Currencies. While both are digital monetary assets, that’s about where the similarities end.

Lagarde’s opinions hold significant weight in some mainstream circles, and her enthusiasm for the digital Euro highlights these differences, emphasizing the importance of understanding their nuances. 

Bitcoin is a decentralized cryptocurrency that operates on a peer-to-peer network supported by blockchain technology, ensuring transparency, immutability, and security. 

In contrast, CBDCs are centralized digital currencies controlled by central banks, which allows governments to influence monetary policies and regulations.

The decentralized nature of Bitcoin offers users financial freedom and autonomy that CBDCs cannot provide. This is something Lagarde has highlighted in her support for a digital Euro and the subsequent control that comes with it. 

One fundamental difference between Bitcoin and CBDCs is their classification as monetary assets, which can be either real or financial. Real assets are not liabilities for any economic agent, while financial assets represent the liabilities of another party.

Bitcoin is a real asset because it doesn’t involve any financial obligations for any entity. In contrast, CBDCs are linked to central banks as obligations. This distinction is crucial because the value of financial assets depends on the debtor’s ability to meet their commitments. 

If a debtor fails to honor these commitments, the financial asset depreciates. Consequently, the issuing institution can destroy the value of a CBDC, but it can’t exert the same influence over Bitcoin, as no single entity controls its value.

Bitcoin’s fixed supply cap of 21 million coins, predictable issuance rate, and deflationary nature makes it an attractive hedge against inflation and currency debasement. However, CBDCs are subject to the discretionary monetary policies of their respective central banks, which may lead to inflation or deflation.

Furthermore, Bitcoin’s decentralized architecture enables anyone to mine it and verify transactions, whereas CBDCs depend on existing centralized banking systems. As a result, Bitcoin’s robust security features, rooted in its distributed ledger system, make it less vulnerable to cyberattacks, fraud, and system failures than CBDCs.

Finally, Bitcoin is a proven concept with over a decade of successful operation, while CBDCs are still in their nascent stages. Despite the challenges and criticisms Bitcoin has faced, it has demonstrated resilience, paving the way for the broader adoption of digital assets.

No, Bitcoin is Not the Currency of Criminals

Christine Lagarde has raised concerns about Bitcoin’s association with money laundering, crime, terrorism funding, and illegal activities. 

These apprehensions are not entirely unfounded, as cryptocurrency’s anonymity and decentralized nature have attracted the attention of various nefarious actors. 

However, it is essential to examine these claims in the broader context of financial crime and compare the role of Bitcoin with that of traditional currencies. While it’s true that Bitcoin has been used for illegal activities, it’s essential to recognize that it represents only a small portion of the currency involved in such transactions. 

According to a 2022 report from blockchain analytics firm Chainalysis, less than 1% of all cryptocurrency transactions in 2020 were associated with illicit activities, with the majority of these transactions involving Bitcoin. 

The report also found that the total value of illicit cryptocurrency transactions was just over $14 billion, a relatively small sum compared to the trillions of dollars laundered through traditional financial systems each year. 

In fact, cash and traditional currencies have long been the preferred method for money laundering and other illegal activities. 

The United Nations Office on Drugs and Crime (UNODC) estimates that between 2% and 5% of global GDP, or approximately $800 billion to $2 trillion, is laundered each year through cash transactions and traditional banking systems. 

This figure significantly surpasses the scale of cryptocurrency-related crime, demonstrating that conventional financial systems remain the dominant enablers of illicit activities.

It’s important to emphasize that the same blockchain analysis tools aiding law enforcement in tracking illicit transactions can also be employed to bolster transparency and curb corruption in traditional financial systems. These tools are still in their infancy, and the biggest tool in their toolbox at this point is probability, so many bitcoiners are actually not fans of companies like Chainanylis, but we’ll take our wins where we can get them.

In short, criminals will always use everyday things to do crime. Is owning a hammer a crime if a criminal uses it to enter a building or kill someone? No. The tool is meant for one thing, and a criminal decides to use it for something else.

I’m not going to get off into the weeds here about crime and bitcoin, but you’ve also got to consider that in many countries, many things we’d consider rights in the US are criminalized, such as public protesting, and bitcoin provides a way for people outside the US to engage in these activities.

Bitcoin’s Foundation As A Global Money

The assertion by Christine Lagarde, the President of the European Central Bank – that Bitcoin is worth nothing and based on nothing – is not just perplexing, but also steeped in irony. 

Much like the US dollar, the Euro itself is a fiat currency, deriving its value from the trust the public places in the issuing entity to maintain stability. 

While the current fiat currency system manages to function, despite occasional economic turbulence, Bitcoin offers something more substantial and reliable. The truth is, Bitcoin is far from being based on nothing. 

In fact, it is built on a foundation that goes beyond mere confidence. Bitcoin operates on a secure, decentralized network underpinned by robust, unbreakable mathematics. Its principles are unchangeable and incorruptible, thanks to its self-checking, so-called triple entry accounting that doesn’t require human intervention to function seamlessly.

Unlike traditional currencies, Bitcoin cannot be influenced or manipulated by individuals, governments, or countries. As a deflationary store of value with a fixed supply cap of 21 million coins, it offers long-term stability and predictability. 

This aspect of Bitcoin makes it an appealing alternative to fiat currencies, which are often subject to the whims of monetary policies and political interference.

Drawing a parallel with gold, Bitcoin can be seen as an improvement upon the factors that give gold its value. Gold has historically been chosen as a store of value due to its durability, scarcity, and recognizability. 

Bitcoin shares these qualities but with the added advantage of easier transportation and storage. Its digital nature allows for seamless transfers across the globe without the need for physical handling or security measures typically associated with gold.

Furthermore, Bitcoin’s decentralized architecture, coupled with its transparent and tamper-proof blockchain, lends credibility to its value proposition. 

Unlike fiat currencies, which rely on centralized institutions and opaque processes, Bitcoin’s value is upheld by a vast network of participants who verify transactions and maintain the integrity of the system.

To suggest that Bitcoin is based on nothing and has no inherent value is a gross mischaracterization of its underlying principles and attributes. 

Bitcoin not only has intrinsic worth but also represents an evolutionary step forward in the world of finance. Policymakers and financial institutions should recognize and embrace these qualities, rather than dismiss them as mere hype or baseless speculation.

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Christine Lagarde Doesn’t Understand Bitcoin (Or Pretends Not To)

Again, with all these mainstream economists who publicly criticize bitcoin, it’s hard to tell if they simply don’t understand bitcoin, or if they are being willfully ignorant because their job requires it.

It is difficult to get a man to understand something when his salary depends upon his not understanding it.

Upton Sinclair

Lagarde and other central bank insiders like Jerome Powell attempt to make the case that there will be no need for bitcoin once they introduce CBDCs to the public, but statements like that fail to recognize the actual value proposition of bitcoin, namely that bitcoin is not under the centralized control of central banks or governments. Even if a CBDC achieves global final settlement of value as fast or faster than bitcoin, you still have to trust that they will manage the money reponsibly.

This idea is perfectly exemplified during a very famous (among bitcoiners) town hall meeting Dutch television with Christine Lagarde. Lagarde took questions from the host and audience. At one point, the host asked her if the 8 trillion dollar balance sheet of the ECB resembled that of a typical cryptocurrency bubble.

Deeply offended and taken aback, she responded that the ECB doesn’t hold any cryptocurrency. The host then continued, and asked how she would reduce the balance sheet. Obviously shaken and unable to clearly answer the question, she got super defensive and said it was their only option, and that the balance sheet would come down “in due course”.

With nothing more specific to say, she then repeated herself. In due course.

When I watched that, it was clear to me that there is no roadmap at this time. They’ll figure it out, and the commoners in the public doesn’t really need to know more than that.

This is in stark contrast to bitcoin which has completely transparent monetary policy. You know exactly what bitcoin will look like in 10, 20, or 100 years. Policy changes are not made behind closed doors, but out in the open on social media and open public forums. Then ultimately, you get to choose what code to run on your node, or you can write your own.

Lagarde does have a point, that people trust fiat currencies because they trust the intelligentsia running our government. But what happens when that trust is lost? Right now, trust is eroding on the edges among niche communities of gold bugs, bitcoiners, and libertarians, but what happens when the loss of trust goes mainstream? Can fiat Euros survive with the trust is no longer there?

Her earlier words come to mind – if there is an escape hatch, people will use it.

Rising Above the Rhetoric: Bitcoiners Respond

Among all the statements Lagarde has made over the years, the most attention-grabbing and unexpected remarks came during the hoax video featuring a faux Zelensky. 

These impromptu and unfiltered comments sparked a massive response from the Bitcoiners.

₿itcoin Kramer tweeted this in direct response to the video:

“I’d personally like to thank Christina LeGarde for choosing to advance Bitcoin by making it so painfully obvious to the masses where all this is going.”

Niko Jilch from FixTheMoney emphasizes that Lagarde seems to have a fundamental misunderstanding of Bitcoin, and he reiterates the crucial distinction between CBDCs and Bitcoin itself:

“It is decentralized and has a clear use case as an open money system. I don’t get the impression that Lagarde has understood the importance of Bitcoin. She doesn’t have to. She just needs to make us afraid of it so that we accept the digital euro as an “alternative” once it arrives. Yet the digital euro is the opposite of Bitcoin.”

In response to Lagarde’s remarks on Bitcoin’s value and its alleged lack of backing, Geeky.News offered a compelling counterargument about where one should place their trust when it comes to financial assets:

“Residents of countries such as Venezuela (suffering from hyperinflation) or Russia (with frozen euros as economic sanctions) may already be among those who tell us not to necessarily trust the value guarantee announced by central banks.”

“…everyone will give their trust to whomever they want. Or the MNBK and their central banks, which are already driving us straight to an economic disaster (hyperinflation or recession). Or to Bitcoin, the new digital gold, whose code provides for 21 million units, and not one more.”

Fabian Klauder from DeFiTimes perceives a silver lining in this situation, as the rhetoric surrounding Bitcoin indicates its growing presence in the public consciousness, and it seems to genuinely concern those who aim to maintain control over currency:

“For me, this is as bullish as it can get. Even though Lagarde’s comments were mostly negative, it shows how much Bitcoin has established itself over the years.”

“It’s only a matter of time until we win. But don’t expect the battle to be easy. Central banks and governments will fight. They will try to ban Bitcoin and crypto, and they will overly regulate it.”

“But in the end, crypto will succeed. When you see Christine Lagarde talking bad about Bitcoin, you know that we have already won!”

Despite the challenges and criticisms from central banks and government officials like Christine Lagarde, the global adoption and influence of Bitcoin grow stronger each day. 

Bitcoin is clearly living rent-free in the minds of the economic elite, and it’s a testament to the power of decentralization, innovation, and the relentless pursuit of a fairer, more transparent financial system.