Crypto Remains a Threat: ECB Chief Christine Lagarde

Crypto service providers may be an “accomplice to” circumventing sanctions against Russia, and crypto assets have been and remain a threat, said Christine Lagarde, president of the European Central Bank (ECB).

Lagarde said the amount of Russian rubles going into crypto and stablecoins have been on the rise, speaking at the Bank for International Settlements’ Innovation Summit on Tuesday.

Trading volumes between the Russian ruble and bitcoin soared to a nine-month high even as the country's fiat currency plunged to record lows against the dollar due to its invasion of Ukraine in late February. Regulators in Europe and the U.S. implemented heavy sanctions on Russia in an attempt to isolate its economy.

“We have taken steps to clearly signal to all those who are exchanging transacting offering services in relation to crypto assets,” Lagarde said, adding that they are “accomplices” to those trying to circumvent sanctions.

While lawmakers have expressed concerns that crypto might be used to evade sanctions, there has been little evidence to support this. Multiple U.S. officials have stated they do not see sanctions evasion via crypto as a realistic possibility.

But Lagarde’s comments on Tuesday seemed to suggest crypto assets are generally associated with financial crime.

"So is it a threat? Yes. Has it … been a threat in the past? Yes, because when you look at a lot of the dubious transactions that are taking place, a lot of the criminal activities payments that are taking place, very often you find some crypto assets,” Lagarde said.

In February, Lagarde said that it’s “critically important” to quickly finalize and enforce the European Union’s proposed regulatory package for crypto assets, particularly over concerns that sanctioned entities in Russia will turn to crypto to evade sanctions. The proposed Markets in Crypto Assets (MiCA) framework is currently moving through the EU’s complex legislative process.

Lagarde also talked about the ECB’s much-anticipated plans for a digital euro at a moderator’s urging during Tuesday’s session. Although regulators in the U.S. and beyond have previously indicated central bank digital currencies (CBDC) should not be rushed, Lagarde said that sentiment might have changed due to a number of reasons, including pressure from customers.

She recently said she would support speeding up work on a potential digital euro.

“Yes, there is urgency, and we need to do real solid work to respond to the needs that are out there," Lagarde said on Tuesday.

The digital euro needs to be “operational, faster, easier, cheaper, more secure across the whole of Europe,” Lagarde said, adding that a digital currency should improve inclusion and support financial stability. However, the goal of a digital currency is not a monetary policy instrument or a means to eliminate cash, she noted.

Lagarde added that the ECB wants to prevent other players from taking sole advantage of the digital world and that the ECB is on track to complete its digital euro project in two years.