Trichet, former ECB Governor: Bitcoin is not real

During the Caixin conference in Beijing, the former Governor of the European Central Bank (ECB), Jean-Claude Trichet, stated that he believes that bitcoin is not real and that it does not have the characteristics that a currency should have. 

This was reported by the South China Morning Post (SCMP), revealing that Trichet also said he doubted that cryptocurrencies could ever become money in the future. 

Indeed, speaking at a panel discussion during Caixin’s tenth annual conference, he said: 

“I am strongly against bitcoin, and I think we are a little complacent. The [crypto]currency itself is not real, with the characteristics that a currency must have. Even if [the cryptocurrency] is supposed to be based on underlying assets, I am observing a lot of speculation. It is not healthy”.

This last statement of his actually suggests that he has made some confusion between bitcoin, which does not and cannot have any underlying, and probably Libra, which will be backed but will not be a real cryptocurrency. 

After all, Jean-Claude Trichet is a traditional banker, 76 years old and little accustomed to financial news and innovations, to the extent that, for example, he was harshly criticised when he was governor of the ECB for his too orthodox, traditional and passive approach to the great financial crisis that hit the global financial system in 2009. 

His successor, Mario Draghi, proved to be much more open both in terms of the possibility of experimenting with new monetary policies and with regard to cryptocurrencies themselves. Moreover, the new governor, Christine Lagarde, seems very interested in these new technologies.  

Trichet also added: 

“I have great doubts of keeping control of monetary value in [the cryptocurrency] domain. In the so-called new stable international currencies … the SDR would be the right basket”.

The IMF’s SDR (Special Drawing Rights) is composed of 42% of the US dollar, 31% of the euro, 11% of the Chinese yuan and 8% of the Japanese yen and British pound, a basket very similar in some ways to that of Libra, but with the Chinese yuan in place of the Singapore dollar. 

It is curious, however, that when Christine Lagarde was director of the IMF, she never proposed to use the SDR as a basket to make stablecoins, but instead proposed to the central banks themselves to issue their own digital currencies. 

In other words, Trichet’s reasoning on cryptocurrencies seems a bit confused, and perhaps victim of strong prejudices generated by a certain fear of experimenting with new solutions different from the traditional ones. 

Fortunately, the new governor of the ECB seems to have much clearer ideas and a much deeper knowledge of these new technologies.