Speaking at the Conference on Technology-Enabled Disruption, Agustín Carstens, the general manager of the Bank of International Settlements, questions the lack of “tangible assets” backing cryptocurrencies and asks for more clarity for consumers.
Carstens has taken a long, hard stance against Bitcoin and cryptocurrencies, denouncing them as “fake money” and imploring young people to “stop trying to create money.” As the banker for over 60 central banks powering a well-established, global financial system that includes Sveriges Riksbank, a 351-year-old institution, the economist says the incumbents are facing pressure from above and below – from tech giants to startups.
Today Carstens’s language has softened on the prospects of crypto and the pace of change.
Less strident and more open to the idea of living with digital currencies, he categorizes them as both disruptive and innovative.
“They have a role as a crypto asset. If you have an asset that is out there, and some people may want to intervene there, there might be some room for that. What I would want to see is to have more clarity in terms of what the assets are. Giving some guidance to potential investors to have clear rules, and so on.”
Despite exploring the new space that cryptos are occupying in the financial markets, Carstens draws a hard line on cryptocurrencies that aim to be spent by everyday shoppers and consumers using digital wallets.
“They might have room as part of financial assets in general but not as cash or cash substitute.”
In a blog post for Reuters, Carstens writes,
“Today’s cryptocurrencies, for example, do not fulfill money’s basic premise: to serve as a unit of account, a means of payment and a store of value. Central banks have called out the false promises made by the creators of cryptocurrencies and will remain alert to potential threats to monetary stability.”
Carstens calls central banks the “guardians of stability”.
As for blockchain, Carstens says the innovation is a very powerful technology and explains how central banks are approaching the new landscape.
“At the same time, they are actively exploring the possibilities that the underlying distributed ledger technology opens up for payments, clearing and settlement systems as well as digital currencies.”
Watch Agustín Carstens speak about digital currencies and blockchain with @RobSKaplan at the conference on technology-enabled disruption organised by @DallasFed @AtlantaFed & @RichmondFed pic.twitter.com/VArCoZWkzl
— Bank for International Settlements (@BIS_org) June 4, 2019
As crypto and digital ledger technology innovators in the finance sector are reducing cross-border settlement times from days to minutes, streamlining paperwork and driving efficiency by building cost-effective blockchain-based systems that can eliminate ancient banking procedures, central banks are, according to Carstens, maintaining their edge.
“Navigating new waters may require recalibrating the compass, but central banks will always have their pole star.”