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European Central Bank director warns of free banking services?

European Central Bank director warns of free banking services?

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Answer European Central Bank director warns of free banking services?

Amid the rise and widespread proliferation of cryptocurrencies and blockchain-based monetary applications, central bankers are increasingly concerned.

Despite the high volatility and risks involved in digital assets, institutional investors continue to embrace them.

Also, there is increasingly activity in cryptocurrencies from small investors and retail traders.

In this context, there is a renewed sense of necessity to respond to the demand for the new digital asset class.

Christine Lagarde, President of the European Central Bank (ECB) stated that it is time to respond to the demand for cryptocurrencies.

she spoke About the crypto ecosystem at a discussion organized by the Bank of France on Tuesday, she spoke about the need to support digital central bank currencies.

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She added that central bankers would lose an opportunity if central bank digital currencies (CBDCs) were not adopted.

Christine Lagarde warns against free banking:

The president of the European Central Bank told that central bank governors have been acting as a control anchor in relation to banking activity and private money.

She said:

As central bankers, we risk losing the anchor role we have played for many decades (in reference to crypto assets).

Christine Lagarde added that there is a need for active participation in experimentation and innovation in the CBDC arena.

Lagarde explained:

There is the possibility of another free banking period as a result of the adoption of cryptocurrencies.

She referred to the last era of free banking in the nineteenth century and argued that a change in response was necessary to preserve the anchor role of central banks.

Added:

We have historical examples of a period when the monetary anchor of the central bank did not exist.

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This led to crisis after crisis.

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This was certainly the case at the time of “free banking” in the nineteenth century.

Difficult Macroeconomic Scenario in the Future:

In this context, the rising macroeconomic situation is part of the reason for increased investment in cryptocurrencies.

In a different event on Monday, Christine Lagarde said 2023 could be a tough year for the economy.

It expected the last quarter of 2022 and the first quarter of 2023 to be negative.

This is a major shift in her previous position.

Lagarde said last year that there is no forecast of a recession in 2022 or 2023.

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