ECB’s Villeroy says U.S. crypto support will lead to a financial crisis

European Central Bank Governing Council member Francois Villeroy de Galhau revealed that the United States posed a risk to bring about the next financial emergency. He argued that the U.S.’ support of cryptocurrencies and non-bank finance would lead to another financial crisis.

In an interview with the French weekly La Tribune Dimanche, Villeroy said that “the United States risks sinning through negligence.” The French senior civil servant also highlighted that European supervision was better secured and argued that there was no risk of a banking crisis in the EU.

Villeroy believes the U.S. will bring the next financial crisis

European Central Bank Governing Council member Francois Villeroy de Galhau believes that the U.S. risks bringing about the next financial collapse. The ECB member said that the state’s backing of virtual currencies and non-bank finance will cause a financial emergency.

Financial crises often originate in the United States and spread to the rest of the world. By encouraging crypto-assets and non-bank finance, the American administration is sowing the seeds of future upheavals.”

-Francois Villeroy de Galhau, European Central Bank Governing Council member.

The banker also maintained that the euro should be more important internationally. Villeroy believes that Europe needs to “build a powerful savings and investment union, capable of attracting international investors to our currency.” The Governor of the Banque de France said that digital assets could generate even greater savings for the financial industry and end-users.

U.S. President Donald Trump championed digital assets during last year’s campaign, and he has kept part of his promises. Trump signed an executive order calling for the establishment of a Strategic Bitcoin Reserve and a separate stockpile of other digital currencies. Since former Gary Gensler resigned when Trump took office, the Securities and Exchange Commission has dropped around a dozen legal actions against digital asset firms.

Villeroy champions digital assets in Europe

In January, the European banker said that asset tokenization is another groundswell movement that could enhance trade and post-trade activities. Villeroy argued that asset tokenization paved the way for another acceleration with the widespread implementation of T+0 (ensuring settlement within the same day of transaction execution).

The European Securities and Market Authority (ESMA) proposed in May last year that the European Commission and the co-legislators assess the opportunity for a European-wide supervision of digital asset service providers. The French civil servant argued that a direct supervision mechanism would enable more effective oversight of the crypto industry and provide better protection for European investors in the long run. 

Villeroy noted that Europe had made the right step by adopting the MiCA regulation. He argued that “failing to regulate crypto-assets and non-banks today would merely sow the seeds for tomorrow’s financial crisis.” 

The Banque de France’s governor said on May 6, 2024, that central banks would need both wholesale and retail digital currencies. He maintained that central banks needed to take risks rather than wait for “absolute certainty” on new technology. Villeroy told an event at the Bank for International Settlement (BIS) that central banks in Europe shouldn’t “lag behind” on technology such as tokenization.

Villeroy added that a central bank digital currency would ensure convertibility between tokenized assets and serve as a reliable basis of trust for the new technologies to realize their full potential. A research from the European Central Bank found that most consumers would not take up the digital euro if they were given the choice. ECB said that the key motivation for setting up a digital euro regarded the declining use and acceptance of cash in day-to-day payments and increasing digitalisation of the payment landscape.

Panelists at the ECB and Its Watchers conference also agreed on March 12 that the European Central Bank’s policy framework did not need altering despite changes in external circumstances.

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