10.11.2019 – South China Morning Post
By Louise Moon
- “The [crypto]currency itself is not real, with the characteristics that a currency must have,” said the European Central Bank’s former president Jean-Claude Trichet, at Caixin’s conference in Beijing
- An alternative monetary tool to existing currencies is the Special Drawing Rights (SDRs) by the International Monetary Fund, Trichet said
Stacks of computers used for mining bitcoin at the Bitfarms cryptocurrency farming facility in Farnham, Quebec, Canada, on Wednesday, January 24, 2018. Photo: Bloomberg
“I am strongly against bitcoin, and I think we are a little complacent,” Trichet said during a panel discussion at Caixin’s 10th annual conference on Sunday in Beijing. “The [crypto]currency itself is not real, with the characteristics that a currency must have.”
Buying a cryptocurrency is “in many respects pure speculation,” said Trichet, who led the ECB from 2003 to 2011, after a decade as governor of the Bank of France. “Even if [the cryptocurrency] is supposed to be based on underlying assets, I am observing a lot of speculation. It is not healthy.”
Trichet’s comment echoes the concern shared by global central banks about the threat posed by cryptocurrencies, for their decentralisation of traditional currencies, disruption of the global financial system and hindrance to monetary authorities in controlling the value of money. The ECB’s board member Benoit Soeure went as far in September as warning that cryptocurrencies could “challenge the supremacy of the US dollar,” in a report on CNBC.
European Central Bank’s former president Jean-Claude Trichet during a press conference in Frankfurt on April 7, 2011. Photo Agence-France Presse
At the summit, the 76-year-old French economist said he was also “very much against” Libra, a cryptocurrency project proposed by Facebook in June. Originally announced alongside a list of corporate backers, the social media site has faced scrutiny over entering the financial services space causing firms like Visa, MasterCard and PayPal to pull support in October.
Chinese banks are barred from handling bitcoin or any cryptocurrency, although individuals are not barred from holding them. China hosts some of the world’s largest bitcoin and cryptocurrency mines.
Bitcoin is the world’s first, and most popular cryptocurrency, founded in 2009 by an unknown developer known as – what’s commonly thought to be a pseudonym – Satoshi Nakamoto. The value of bitcoin has swung from US$0.003 in March 2010 to a record US$20,000 at the end of 2017, before crashing the following year, now trading at around US$8,800 each.
A monetary tool that Trichet prefers is the Special Drawing Rights (SDR) created by the International Monetary Fund (IMF), whose value is pegged to the US dollar, the euro, the pound sterling, the renminbi and the yen.
“I have great doubts of keeping control of monetary value in [the cryptocurrency] domain,” said Trichet. “In the so-called new stable international currencies … the SDR would be the right basket.”
The world may be moving away from physical coins and notes, but that path may not be in the direction of cryptocurrency, Trichet said.
“We are already in a domain which has much less physical currency,” he said. “Whether we are in a domain where that will be replaced with crypto? I have doubts there.”