'We don't have much time left' to regulate crypto, says Bank of France governor

Bank of France governor Francois Villeroy de Galhau said that Europe should make crypto regulation a priority or risk digital assets challenging its monetary sovereignty.

At a Paris Europlace financial conference today, Villeroy said he believed the European Union only had “one or two years” left in which to establish a regulatory framework for cryptocurrencies. To not act, according to the central bank governor, would “risk of an erosion of our monetary sovereignty” and potentially weaken the euro.

"I must stress here the urgency: we do not have much time left, one or two years," said Villeroy. “On both [digital] currencies and payments, we in Europe need to move as quickly as possible.”

Villeroy called on the EU “to adopt a regulatory framework in the coming months,” given the growing role cryptocurrencies are playing in regional markets. The use of cash declined during the first few months of the pandemic, a trend that Villeroy said could lead to "marginalization of the use of central bank money.”

Related: Bank of France Is Closely Watching Stablecoin Developments, Says Governor

The Bank of France governor has previously warned regulators against the potential risk of cryptocurrencies, including stablecoins and central bank digital currencies, or CBDCs. In September he said big tech companies could potentially build “private financial infrastructures and monetary systems” — including issuing their own stablecoins — which could adversely impact financial sovereignty in the EU for decades.

In January, the bank completed a pilot program for its own CBDC, later reporting investors had purchased and sold 2 million euros — roughly $2.4 million at the time — worth of simulated shares. The Bank of France has said it will conduct other test runs for the digital currency this year.