Contrary to the notion among many crypto enthusiasts that bitcoin is a speculative investment with major upside potential, a stakeholder in the legacy financial sector has rubbished the value attached to digital assets, describing them as mere software algorithms with no utility.
The verdict was given by the general manager of Bank for International Settlements (BIS), Agustin Carstens, before an audience in Miami on Nov. 1. The Mexican economist underscored reforms in payment systems being embarked upon by Central Banks. These reforms were, according to him, of more economic value than the attention given to digital assets such as bitcoin.
“The use of ‘currencies’ is misleading. Cryptocurrencies, such as bitcoin, ether, and tether, do not serve the core functions of money,” he stated. Lending credence to his stance, he referred to the volatility in their value (which has ironically decreased dramatically in recent weeks), adding:
“No cryptocurrency is a true unit of account or a payment instrument, and we have seen this year that they are a poor store of value. Buyers of cryptocurrencies are buying into nothing more than a software algorithm.”
While shedding light on the strengths of retail payments from a wider perspective, Carstens highlighted statistics relating to the value of card payments over a period of 16 years.
“Globally, the value of card payments reached 25% of GDP in 2016, compared with 13% in 2000, according to the Committee on Payments and Market Infrastructures. Already widespread mobile phone applications are boosting cashless payments,” he argued.
Carstens, who was the former governor of the Bank of Mexico from 2010 to 2017, also highlighted some of the efforts made by central banks in upgrading the existing payment infrastructure as superior to innovations in the nascent blockchain field.
“While this work is not as attention-grabbing as crypto-this and crypto-that, developing new hardware, software and processes to safeguard your money, strengthen financial stability and protect the economy are of immense importance,” he alleged.
At a recent interview with Swiss German newspaper Basler Zeitung, Carstens had urged crypto-curious young people to “Stop trying to create money!” He advised them instead to focus their energies on technological advancements that could make the world a better place, rather than focusing on a currency that doesn’t “fulfill any of the…purposes of money.”
More pointedly, he called bitcoin a “bubble, a Ponzi scheme and an environmental disaster” during a February speech at Goethe University’s House of Finance.
Featured image from Flickr/International Monetary Fund