BIS Agustin Carstens Warn: Central Banks Must Clamp Down on Cryptocurrency to Prevent the Bitcoin Bubble
Cointime (February 06) — Bank for International Settlements (BIS) General Manager, Agustín Carstens, warned the central bank must prevent cryptocurrencies from attaching to the mainstream institution and become a threat to financial stability.
BIS is an international financial institution owned by central banks. Carsten, the Mexican economist, accused bitcoins as a "combination of a bubble, a Ponzi scheme, and an environmental disaster."
The conflict between mainstream financial institutions and digital currencies might have resulted in another sharp drop in bitcoin’s value. Bitcoins value evaporate nearly two-thirds within one month.
Carsten spoke at Goethe University in Frankfurt Germany,
“The volatility of bitcoin renders it a poor means of payment and a crazy way to store value."
He further said, if the government preempt, the relevance of digital currencies to the major financial system is going to increase. And that becomes a threat to financial stability.
Last year, cryptocurrency value and quantity increased dramatically. In the beginning of this year, the total value was $830 Billion. However, 70% of its value evaporated almost overnight.
According to Caixin news, China is planning on closing bitcoins exchanges. They also reported that an inter-departmental internet finance working group led by the People’s Bank of China is drafting rules to prohibit bitcoins and other cryptocurrency trading platforms.
Most banks refused to call attention to Cryptocurrency. Its anonymity trigger money laundering concerns.
“If the only ‘business case’ is used for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeloads on the trust that it provides.”
Many British lenders refuse to offer mortgages to people who deposit money by selling cryptocurrencies because the money cannot be traced. Many US and UK banks also halt users from purchasing cryptocurrencies with credit cards.
However, cryptocurrencies have infiltrated Wall Street. The two major exchanges in the United States, the Chicago Mercantile Exchange, and the Chicago Board Options Exchange created bitcoins future contract last December.
At the same time, investors interest in cryptocurrencies and Initial Coin Offering (ICO) continue to grow. ICO financed blockchain startups with more than $3.4 Billion last year.
Carsten, the former governor of Mexico’s central bank, believed,
“[Investor’s interest] has more to do with speculative mania than any use as a form of electronic payment, except for illegal activities.”
Finally, Carsten acknowledged that many of the world’s major central banks have paid close attention to the possibility of using the blockchain distributed ledger technology (DLT) to transform their business.
But he also pointed out,
“In practice, central bank experiments show that DLT-based systems are very expensive to run and slow and must less efficient to operate than conventional payment and settlement system.”
Executive editor： Angel