BIS GM: Central Banks Should be the Ones to Issue Digital Currency; Find Stablecoins ‘More Credible than Bitcoin”
Fiat-backed crypto still needs to be “heavily regulated and supervised,” says Agustín Carstens, according to him Bitcoin may well break down altogether.
According to the Bank for International Settlements, Bitcoin is inherently risky, and only a central bank should be issuing digital currencies.
These latest remarks on “Digital currencies and the future of the monetary system” came from Agustín Carstens, General Manager at Bank for International Settlements.
“Investors must be cognizant that Bitcoin may well break down altogether,” said Carstens during his speech for the Hoover Institution on Wednesday.
This isn't anything new coming from Carstens, who runs the Basel-based central bank for central banks, and has always been critical of Bitcoin, which has jumped more than 1,000% from its March lows and currently trades around $31,000.
This time, his skepticism cites the system being vulnerable to majority attacks as the digital asset gets close to its maximum supply of 21 million coins.
According to him, its volatility not only “undermines” its use as a means of exchange but also makes it a “poor store of value.”
“Bitcoin is more of a speculative asset than money,” he further noted, adding “the actual value backing is lacking” in the leading digital currency as such should be seen as a community of online gamers.
He also cited price manipulation and mining using “more electricity than all of Switzerland,” reasons for this complete breakdown.
Issues with Currency Issue
As for fiat-backed cryptos, stablecoins like Facebook’s Libra renamed Diem, Castens sees it “more credible than Bitcoin,” but finds serious governance concerns in terms of a private entity responsible for issuing it and maintaining the asset backing.
“Private stablecoins cannot serve as the basis for a sound monetary system,” he added: “They need to be heavily regulated and supervised.”
Castens basically wants central banks to keep full control of money, which, as we saw over the last year, the policymakers printed at unprecedented levels. He said,
“Clearly, if digital money is to exist, the central bank must play a pivotal role, guaranteeing the stability of value, ensuring the elasticity of the aggregate supply of such money, and overseeing the overall security of the system.”
Since the beginning of 2020, the US Federal Reserve has printed more than $4 trillion US dollars.
“If digital currencies are needed, central banks should be the ones to issue them,” Carstens said.