Christine Lagarde doesn't understand Bitcoin and her "digital Euro" is just a step towards more surveillance

German newspaper "Die Welt" asked me about Bitcoin, Crypto and Lagarde - here is what I said

I got the chance to talk to the German broadsheet newspaper “Die Welt” about Bitcoin, Crypto and the ECB yesterday. Main subject were the comments by ECB-President Christine Lagarde. She wants to “regulate crypto” - whatever that means.

She also thinks it’s worth nothing and revealed that her son actually owns some “crypto”.

As you might know, I despise “crypto” as much as she does… It’s a bunch of useless ponzi schemes, the Luna collapse has illustrated that again.

But we differ on Bitcoin. I doubt that Lagarde understands its significance. Here is the interview, translated by DeepL, edited by me. (original source)

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WELT: Mr. Jilch, ECB President Christine Lagarde has spoken out in favor of regulating cryptocurrencies and considers them to be "worth nothing". In fact, Bitcoin and Co. have lost a lot of value in recent months. Is Lagarde using the opportunity to disavow money that competes with paper currencies - or is the warning justified?

Niko Jilch: It is important to distinguish between Bitcoin and "crypto" - these are basically two different things. Bitcoin is a new money system that manages itself and runs according to its own rules. "Crypto" is often companies disguised as decentralized systems that hide behind constructs and yes, often rip people off. So as far as Ethereum, Solana, Cardano or most recently Luna are concerned, I would agree with Lagarde - there is nothing to them. Promises are made that are not kept. They are basically extremely risky venture capital investments.

WELT: And bitcoin is different?

Jilch: 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.

WELT: That will come as a surprise to many who have so far tended to regard the digital euro as an officially sanctioned bitcoin alternative.

Jilch: That's how people like to sell it, but of course it's not. The digital euro is centralized, its future and monetary policy are uncertain, and it is decided by a council, just like the analog euro. With bitcoin, it's all transparent and fixed. The digital euro will also not be as open as Bitcoin. But most importantly: it will not preserve our privacy, as cash currently does. Unfortunately, it is another step toward surveillance - which is why many people are against it.

WELT: Do you have the impression that Ms. Lagarde differentiates between bitcoin and other cryptocurrencies in her criticism?

Jilch: No, absolutely not. It sees everything as one "crypto sector," which is just wrong. In reality, we're dealing with one original and 10,000 imitators who would like to be like the original, but at the same time pretend they're actually much better.

WELT: Lagarde is in favor of regulating cryptocurrencies to, as she says, discourage people from speculating with their savings. In her tenure so far, people have not gotten the impression that Lagarde cares about the fate of savers. How credible is the rationale for her claim?

Jilch: The question captures the problem very well. Lagarde has already said that we should worry less about our savings and be glad to have a job. As if that were thanks to her. That statement is actually outraging. If central banks didn't dilute the value of money at every opportunity, speculative activity - in whatever asset class - wouldn't be so intense either. The ECB's monetary policy is to blame for speculation, not "crypto" - that's just a symptom. But again, it's extremely dangerous, and I can only advise anyone against putting their money there. If digital money, then Bitcoin - and even that only very carefully and slowly.

You can read the interview in German here. Questions by Michael Höfling (@courtisan) - Thank you for the invitation to give my opinion!