The Bank of France governor Francois Villeroy de Galhau has called on the European Union to create a regulatory framework for cryptocurrencies.

According to him, if Europe does not make crypto regulation a priority, there could be dire consequences for the monetary sovereignty of states.

Speaking further at a Paris Europlace financial conference, the Central bank governor emphasized the increasing importance of digital currencies in financial markets.

He called on the EU to speed up plans in issuing a digital euro. “On both digital currency and payments, we in Europe must be ready to move as quickly as needed, ” Villeroy said. Villeroy’s statements centered around urgent ways of preventing the weakening of the Euro. He stressed the urgency saying there was little time in doing this.

He noted that many risks were surrounding the ECB's payments control, with the digital Yuan being part of it. In addition to this, Europeans are using less cash by the day due to the growing role cryptocurrencies play in regional markets.

The use of cash decreased during the first few months of the pandemic, a movement that the governor said could lead to “marginalization of the use of central bank money.”

This is not the first time the central banker would be warning regulators against the risk of cryptocurrencies, including central bank digital currencies (CBDCs) and stablecoins.

During the Bundesbank conference held in September last year, Villeroy described the most imminent risk in Europe to be private financial infrastructures and monetary systems. According to him, they were positioning themselves as issuers and managers of currencies.

China is the leader in developing and deploying wholesale CBDCs. The country is currently testing its digital Yuan, where citizens in different provinces transact payments over their mobile phones.

However, the project has been considered a threat by most Western countries. This is due to the reports circulating the media that China is planning to topple the dominance of the US greenback with its digital renminbi.

However, former central bank governor Zhou Xiaochuan responded to these reports last month.

He said the digital yuan is not designed to replace the US dollar's global dominance. He added that the CBDC is only focused on modernizing the traditional payment system while reducing costs and serving retail payment systems.

Meanwhile, various countries are warming up to CBDCs. The Bank of France has revealed plans to conduct further tests for its digital currency this year after completing a pilot program for its CBDC in January.

In the US, a Digital Dollar Project of five pilot projects was launched last month to test how a Federal Reserve-issued CBDC would operate.

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