Don’t let ECB President Mario Draghi’s statements about Bitcoin fool you.  He’s thinking long and hard about it. 


ECB President Mario Draghi is a cagey character.  I’ve been following him for years.  As Jim Rickards says, “Draghi says little and does less.” And, for that reason Rickards considers him the best of the central bankers.

Compare him to the FOMC board who can’t go 24 hours anymore without making a speech somewhere and you can see the contrast.  So, for Draghi to make the statements he did in responding to a question from a member of the European Parliament’s Committee on Economic and Monetary Affairs is, shall we say, uncharacteristic of him.

To listen to Draghi’s comments directly, go here (the question begins at the 18:05 mark).

Draghi’s admission that the ECB doesn’t have the power to regulate Bitcoin is a strange one.  But, we should take him at his word.  Why?  Because the ECB is hampered structurally by its own charter and how that interacts with the sovereignty of the EU member states.

If you remember back through the various twists and turns of the financial crisis, Grexit, Italy, etc.  Each time something needed saving the ECB would have to gain new powers in order to do so.  TARGET, LTRO, TARGET2, OMT, the bail-in provisions, etc.  It’s a litany of patching in new powers to the central bank to respond to the crisis du jour.

So, at this point, Bitcoin isn’t a threat to the euro.  That’s what Draghi is saying.  It will continue to grow without interference from the ECB, but don’t let that lull you into a false sense of security.  Draghi is very much thinking about the avenues by which the ECB could gain the powers necessary to regulate and/or outlaw Bitcoin.

That’s what his comment about ‘cyber-security’ was all about.  “Here, Committee, this is how we’re going to justify our crackdown in the future.”

The question is, however, by the time the EU acts will it be too late for them to materially do anything about it?  Will the crypto-market be too strong by then.  If reports are true that Amazon is looking to accepting Bitcoin as early as next month, then Draghi’s comments that cryptos are nowhere near ready to act as payment systems is a flat-out lie.

Given that the EU and the ECB only operate quickly under pressure of a banking meltdown, my initial thought is by that point it will be too late.

And since I feel we’re now squarely on that path thanks to changes in U.S. policy and Angela Merkel’s poor showing on Sunday, it’s likely that whatever they do will be haphazard and ineffective.

They have never been pro-active in dealing with a new threat.  Instead they have always simply reacted to the crisis with the new legislation that they’ve had prepared all along.  So, I don’t believe for a second that Draghi doesn’t have some kind of plan for dealing with the threat of cryptocurrencies.

He does.  He just isn’t saying right now.

And it is for this reason that I remain convinced that it’s imperative that people embrace decentralized exchanges now before the crackdown occurs.  The idea of taking something beautifully decentralized like cryptos and putting them on regulated exchanges, introducing single nodes of failure is moronic.

We’ve seen what they can do. We know what they just tried to do.  That the latest coordinated attack on the crypto-market failed to break investor confidence in the sector is to its credit.  But, don’t think there isn’t something else lurking around the corner.

Draghi didn’t really say as much as the initial report on this at Coindesk led me to believe.  But, as always with him, it’s what he doesn’t say that is what’s actually important.


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