German Finance Party Leader Christian Lindner’s Suggestion of Adding Cryptocurrencies to Central Banks’ Reserves Receives Strong Criticism
German Finance Party (FDP) leader Christian Lindner’s proposal to add cryptocurrencies to the reserves of the German Bundesbank and the European Central Bank (ECB) has sparked strong criticism from experts.
There is “no slightest need to build crypto-reserves” said Würzburg economist and former economic advisor Peter Bofinger to the economic magazine “Capital.” The central banks’ primary task is to maintain price stability, and the impact of cryptocurrency prices on this goal is negligible.
Lindner had called for the ECB and the Bundesbank to investigate whether crypto-assets should also be part of the central banks’ reserves in late December. He argued that the new US administration under Donald Trump is pursuing a “progressive” cryptocurrency policy, and Germany and Europe should not lag behind.
At an upcoming FDP parliamentary group event on Friday, Lindner will again discuss the topic of cryptocurrencies, speaking on the question “Is Bitcoin the better money?”
US finance expert Eswar Prasad from Cornell University also criticizes the proposal: “Having an official Bitcoin reserve makes little sense, unless the goal is to boost the price of the cryptocurrency” he told the magazine. Officially recognizing Bitcoin would give it a status, Prasad said, and this could ultimately lead to the government taking on the risks associated with price volatility. The state would be rewarding speculators, Bofinger also fears, asking, “Would it really be a good idea for the taxpayer to help investors realize their crypto-gains?”
The idea is considered unlikely to succeed, not least because the legal independence of the Bundesbank and the ECB excludes such political guidelines. Officially, the institutions are not taking a stance, as they aim to avoid the appearance of interfering in the Bundestag election campaign.