28th February 2022 > > Christine Lagarde and EU regulation.

tl;dr

Convicted Criminal Christine Lagarde and the positive impact of her developing views on the subject of crypto regulation within Europe.

Market Snap (at time of writing)

Market Wrap

After a brief attempt at breaking $40k to the upside yesterday afternoon, Putin’s announcement of putting some of his nuclear forces at the ready was never going to be news that would be welcomed by risk assets. Indeed Wall Street, though up 700 points from last time we spoke, is still down 500 points from Friday’s close.

The UK’s move to state that property and assets owned in the UK behind offshore shelf companies with an opaque ownership structure would be subject to UWO (Unexplained Wealth Orders) is probably the strongest card the West can play. Without the support of the oligarchs, who shelter Putin’s suspected $200bn of stolen wealth overseas, he has little left.

Curious Cryptos’ Commentary – Convicted Criminal Christine Lagarde, head of the ECB

Lagarde has often drawn the wrath of the CCC with her outdated and impractical views and thoughts about the regulation of cryptos.

A prime example was reported on these very pages on 29th November 2021 when she called for the “global regulation (of cryptos)”, an opinion which was backed up by the International Monetary Fund (IMF) in one of their series of misguided discussion papers (see CCC 11th December 2021).

The IMF remember is institutionally responsible for the further impoverishment of many of the world’s poorest people and should - in any world which rightfully places value on fairness and equality - be immediately disbanded.

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It seems though after some admittedly heavy criticism of Lagarde and her prehistoric views of cryptos during 2021 by the CCC, she has spent some considerable time digesting my words, and has begun to learn just a little about the crypto world.

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Back in September 2020, a proposal was introduced to the European Commission with the snazzy title of “Markets in Crypto Assets”, or MiCA for short. Embedded within this document was a statement that brings good cheer to all those who believe that appropriate regulation of cryptos will only hasten global adoption:

“… a regulatory framework for the crypto-assets market that supports innovation and draws on the potential of crypto-assets in a way that preserves financial stability and protects investors.”

I could hardly put it better myself.

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Later adopted by the European Council in November 2021 (who knew that there are all these layers of bureaucracy embedded in the political European structures), today was originally scheduled to be the day for a positive vote of adoption by the European Parliament.

That vote has been postponed as some of its wording was at best ambiguous, with some interpretations that MiCA was an attempt to ban proof-of-work (POW) mining, the consensus protocol used by BTC and ETH amongst others.

Putting aside the fact that any such ban, if one was indeed intended, would be futile and simply drive tax dollars away from Europe, it is undoubtedly better if regulations are clear and precise, to allow businesses to foster innovation and growth.

In response to a reporter’s question about Russia avoiding sanctions using cryptos (conveniently overlooking the fact that Russia keeps trying all sorts of ways to ban cryptos themselves), Lagarde had this to say:

“Whenever there is a ban or prohibition or a mechanism in place to boycott or prohibit, there are always criminal ways that will try to circumvent the prohibition or the ban. It’s so critically important that MiCA is pushed through as quickly as possible so we have a regulatory framework within which crypto assets can actually be caught.”

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For the very first time – and most probably the last – I am going to cut Lagarde some slack here.

I am going to assume that she does not believe that MiCA is an attempt to ban POW mining, and that her support for MiCA is borne from a genuine desire to see a vibrant and successful crypto industry in Europe. A bold claim for sure, but I am going with it.

I am also assuming that her use of the phrase “crypto assets” was simply clumsy because her knowledge of cryptos remains limited, and she does not know to accurately express herself on such topics. I believe she meant “… regulatory framework within which the illegal use of crypto assets can actually be caught”.

Call me naïve if you will.

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It is unfortunate that it takes a war within mainland Europe to get Lagarde to admit she was previously wrong, but this is still a momentous step in the right direction.

Vive l’Europe!