Central banks' bank chief says cryptos must have backing
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As the volatile cryptocurrency story continues to throw up new plot twists, a senior finance chief says that central banks are the key to settling the market.
Agustin Carstens, the general manager of the Bank for INternational Settlements, the central banks’ bank, says that authorities must be ready to take action to protect investors.
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He said that for money to maintain its value, it must be backed by accountable institutions which have public trust; such as the central banks.
"The meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust," Carstens said in a lecture in Frankfurt. "Private digital tokens masquerading as currencies must not subvert this trust."
He said that there is great benefit to come from new technologies, for example in making payment systems more efficient, but he does not believe that requires a new currency.
He warned that technologies should not enable the legitimization of illegal activities and that cryptocurrencies should not be allowed to become entrenched and pose a risk to financial stability.
"Novel technology is not the same as better technology or better economics," Carstens 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."
Referring to the recent price swings for bitcoin, Carstens warned that the unregulated nature of cryptos and the high transaction costs made them “unsafe” especially where they are linked to real currencies.
He concluded that all banking and payment services should be limited to those that can meet high standards.
"This means 'same risk, same regulation'. And no exceptions allowed," he said.
Agustin Carstens, the general manager of the Bank for INternational Settlements, the central banks’ bank, says that authorities must be ready to take action to protect investors.
Celebrating our industry successes in the wealth management industry
He said that for money to maintain its value, it must be backed by accountable institutions which have public trust; such as the central banks.
"The meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust," Carstens said in a lecture in Frankfurt. "Private digital tokens masquerading as currencies must not subvert this trust."
He said that there is great benefit to come from new technologies, for example in making payment systems more efficient, but he does not believe that requires a new currency.
He warned that technologies should not enable the legitimization of illegal activities and that cryptocurrencies should not be allowed to become entrenched and pose a risk to financial stability.
"Novel technology is not the same as better technology or better economics," Carstens 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."
Referring to the recent price swings for bitcoin, Carstens warned that the unregulated nature of cryptos and the high transaction costs made them “unsafe” especially where they are linked to real currencies.
He concluded that all banking and payment services should be limited to those that can meet high standards.
"This means 'same risk, same regulation'. And no exceptions allowed," he said.
