The global stock market has lost an estimated $4 trillion over the course of the past eight days, leaving investors running to gold and other alternative investments to stem the bleeding in their portfolios.
Against this backdrop, Agustin Carstens — general manager of the Bank for International Settlements (BIS), nicknamed the “central banks’ central bank” — took the stage at Goethe University’s House of Finance on Tuesday. But Carstens didn’t come to Frankfurt to talk about equities — he came to talk about Bitcoin.
Carstens, whose speech was titled “Money in the digital age: what role for central banks?,” castigated Bitcoin and other cryptocurrencies as both poor technologies and poor payment systems.
“Novel technology is not the same as better technology or better economics,” he said. “That is clearly the case with Bitcoin: while perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, a Ponzi scheme and an environmental disaster.”
These, of course, are well-worn, largely inaccurate critiques, and Carstens should know better. But, as with almost anyone who evaluates Bitcoin — whether as good or ill — he has an agenda, and that agenda is to prevent cryptocurrencies from becoming entrenched in the financial system and undermining trust in central banks.
“Private digital tokens masquerading as currencies must not subvert this trust [in central banks],” he said, before proceeding to layout a “strong case” for banking regulators to place the squeeze on the cryptoasset ecosystem.
Accordingly, “authorities are edging closer and closer to clamping down to contain the risks related to cryptocurrencies,” he said. “There is a strong case for policy intervention” intended to “safeguard payment systems” and deny cryptocurrencies access to institutional financial infrastructure, because — you can probably guess what’s coming next — cryptocurrencies are only useful for “illicit or illegal transactions.”
He added that commercial banks need to stop giving cryptocurrency-related services preferential treatment, which — apparently — includes an action as anathemic advertising that they have an on-site Bitcoin ATM.
Of course, if establishing this “level playing field” does not take the “oxygen” out of Bitcoin and its sisters, he said that regulators can always tip the scales in their favor later on.
“Financial authorities may also have a case to intervene to ensure financial stability,” he concluded, “if authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability.”
Featured image from Flickr/International Monetary Fund.