New BIS Head Urges Authorities to ‘Act Preemptively’ On Cryptocurrencies

Agustín Carstens, the new general manager of the Bank of International Settlements (BIS), the self-described “bank for central banks,” has made his first major public speech since assuming the role in December 2017. In a February 6 lecture at Goethe University, he said that there is a “strong case” for authorities to intervene in cryptocurrency markets.

The former governor of Mexico’s central bank had plenty of negative appraisals to offer on decentralized digital assets. He warned that “If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat.”

Virtual currencies, he argued, are valued as highly as they are because of the “oxygen provided by the connection to standard means of payments and trading apps that link users to conventional bank accounts.” In Carstens’s view, these digital assets owe their worth to this interoperability and, as such, they are essentially freeloading on the trust that the “overall financial system,” with the assistance of central banks, provides. He sees this reliance, as it were, on traditional financial infrastructure as problematic because in his estimation, the only viable use cases for cryptocurrency are related to criminal activity.

“Private digital tokens masquerading as currencies must not subvert this trust,” the BIS chief declared, in part because they could threaten to impact the “real value” of money.

And indeed, he said, authorities today are “edging closer and closer to clamping down to contain the risks related to cryptocurrencies.”

In contrast to other prominent banking institutions, some of which are interested in exploring other use cases for the blockchain, Carstens did not appear impressed by technologies related to digital assets: “In practice, central bank experiments show that DLT-based systems are very expensive to run, and slower and much less efficient to operate on conventional payment and settlement systems.”

In September 2017, the BIS released a paper exploring the implications of central bank-issued cryptocurrencies.

Adam Reese is a Los Angeles-based writer interested in technology, domestic and international politics, social issues, infrastructure and the arts. Adam is a full-time staff writer for ETHNews and holds value in Ether and BTC.

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