(Bloomberg) -- The plunging appetite for cryptocurrencies doesn’t mean authorities should drag their feet on regulating them, according to European Central Bank Governing Council member Francois Villeroy de Galhau.

“The so-called ‘crypto-winter’ is no reason for complacency or inaction,” the official said Tuesday in Paris. While Europe “has been a pioneer” in designing its own regulatory framework know as MiCA -- Markets in Crypto Assets -- legislation, “other major jurisdictions are less advanced in a similar process.”

Crypto assets have experienced a dramatic slump this year as global central banks respond to soaring inflation by tightening monetary policy. While European regulators are getting closer to finalizing unified rules for the market, Villeroy’s comments suggest there’s a risk that other efforts could be stalled by the decline.

Crypto players typically operate globally, and even their place of establishment is sometimes difficult to determine, he cautioned.

“We should be extremely mindful to avoid adopting diverging or contradictory regulations, or regulating too late,” Villeroy said. “To do so would be to create an uneven playing field, risking arbitrage and cherry picking.” 

Digital Money

ECB President Christine Lagarde later told a panel chaired by Villeroy that there’s clearly more desire for digital payments than in the past. “We have to respond to the demand for those digital payments in order to maintain the role of anchor we have been playing,” she said.

The ECB is one of the first advanced-economy central banks to have made significant progress on exploring the issuance of its own digital currency, and is working with private-sector companies on developing a prototype for a digital euro.

Villeroy shared the view that there’s a role for central banks in modernizing payments, including for infrastructures used by financial institutions. The Bank of France will launch three new experiments related to wholesale central-bank money, including one to issue and distribute tokenized bonds on a blockchain -- the same technology that underlies Bitcoin.

(Updates with Lagarde comments in sixth paragraph.)

©2022 Bloomberg L.P.