The Bank of International Settlements (BIS), the global body for central banks, claims the weaknesses in crypto that were pointed out before “have pretty much materialized.” BIS General Manager Agustin Carstens opined: “You just cannot defy gravity … At some point, you really have to face the music.”
BIS on Crypto Weaknesses
Bank of International Settlements has warned of dangers of decentralized digital currency.
BIS published its Annual Economic Report Tuesday explaining that cryptocurrency market sell-offs and the collapses of cryptocurrency terra and algorithmic stabilcoin terrausd are signs of a structural problem within crypto.
“Structural flaws make the crypto universe unsuitable as the basis for a monetary system: it lacks a stable nominal anchor, while limits to its scalability result in fragmentation. Contrary to the decentralisation narrative, crypto often relies on unregulated intermediaries that pose financial risks,” the BIS report reads.
Agustin Cartstens, general manager at the BIS, stated in an interview on Tuesday that all forms of money lack credibility if there is no government-backed authority that has access to tax funds. He said:
These weaknesses, which were previously pointed out, have all pretty much been realized.
The BIS executive continued: “You just cannot defy gravity … At some point, you really have to face the music.”
Carstens believes that the collapse of the crypto markets will not cause a crisis systemic in the same manner that bad loans created the global financial crash. He detailed:
It should be manageable based on the information we have. But, there are a lot of things that we don’t know.
BIS executives began talking about central bank digital currency (CBDCs) The BIS published a report in May that stated nine out of ten central banks around the world are looking into their digital currency options.
“This is a topic that has been on the G20 agenda for quite some time,” Carstens further told the news outlet, adding that there is “a good chance for this to move forward.” He pointed out that some countries have already conducted “real life” trials with their central bank digital currency.
Carstens believes there will be international standards for CBDCs “in the next couple of years,” noting that 12 months is probably “too short.”
BIS Innovation hub announced today that projects from its Eurosystem Centre are exploring crypto markets. Citing that “The collapse of many stablecoins and decentralized finance (defi) lending platforms has highlighted the difficulty in assessing their risks and economic potential,” the BIS described: “The project’s goal is to create an open-source market intelligence platform to shed light on market capitalizations, economic activity, and risks to financial stability.”
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