Key Insights
- The European Central Bank has just made its stance clear on Bitcoin and crypto in general.
- ECB President Christine Lagarde just rejected a proposal from Czech National Bank Governor Aleš Michl to include Bitcoin into its reserves.
- This proposal stands as one of the few displays of interest from central bank officials in Bitcoin.
- Lagarde pointed out that reserves should be “liquid, secure, and safe,” and believes that Bitcoin lacks all of the above.
- Instead, the ECB is pushing its digital Euro forward, in contrast to the US’ stance.
The Czech Republic recently proposed to include Bitcoin among its official reserve.
However, European Central Bank (ECB) President Christine Lagarde flat-out made it clear that Crypto (including bitcoin) has no place in European central banking.
Here are some of the details worth keeping in mind.
The Czech Proposal and Its Rejection
This week on 30 January during a press conference after the ECB’s interest rate decision, Lagarde took the opportunity to address the suggestion made by
Czech National Bank Governor Aleš Michl.
She reaffirmed the ECB’s standing that Bitcoin, despite being one of the best performing asset classes in recent years, is not suitable for central bank reserves.
Lagarde pointed out that reserves should be “liquid, secure, and safe”:
All of which are characteristics that Bitcoin, in her opinion fails to meet.
She pointed out the cryptocurrency’s notoriety for being volatile, as well as centralization in ownership as reasons for her decision, and mentioned that no central bank within the ECB’s General Council would consider Bitcoin in this regard.
Why does the European Central Bank have any indluence over the Czech Republic’s decisions?
The Czech Republic doesn’t use the euro, which makes the above a valid question.
However, the country is part of the the European Union and has a representative on the ECB’s General Council.
The suggestion from Aleš Michl drew attention, because they stand as one of the (very few) instances where a central bank official from anywhere in the world, expressed interest in Bitcoin as a reserve asset.
However, Michl acknowledged that reserves must prioritize stability, after speaking with Lagarde.
Therefore, the Czech National Bank has refrained from including Bitcoin or any other crypto asset in its ongoing developments..
Will Europe Be Left Behind?
The debate in favor of Bitcoin as a national reserve asset comes amid similar calls from all over the world.
While central banks have collectively shunned the idea of crypto as a reserve asset, some countries (with the US being an interesting example) are beginning to show an openness.
The US Federal Reserve has stated repeatedly that it is prohibited from holding Bitcoin, according to its chair, Jerome Powell.
However, the rise of digital assets continues to pop up from all over the world in politics and in finance.
Only recently, US president Donald Trump signed an Executive Order for a national strategy around crypto.
This order covered several niches of the crypto space, including the prohibition of a CBDC and the creation of a national crypto stockpile.
This stands in contrast to the ECB’s outlook, which continues to view Bitcoin as risky and unstable.
Commentators have taken to Twitter (X) to mention that the European central bank could be “making a mistake”, as “Excluding Bitcoin could be seen as missing out on a forward-looking technology.”
The Push for Digital Euro
While some countries are embracing crypto one day at a time, the European Union remains committed to the development of its own digital currency, called the Digital Euro.
Several members of the ECB have repeatedly suggested that the central bank explore how this digital Euro can be used to tackle the growing interest in crypto from the rest of the world.
Meanwhile, the digital euro will be used to provide a secure alternative to cash.
It will also offer an option for central banks to keep the lead on growth in the digital asset space.
So far, the proposal from the Czech National Bank to include Bitcoin in its reserves may have been shunned.
However, Bitcoin’s value continues to soar, and time will tell whether or not the ECB is making the right choice.
