The General Manager of the Bank of International Settlements (BIS) expressed a dystopian ending for cryptocurrencies — arguing that “creating money from nothing” has “never worked.”
During an interview July 4th, 2018, with Swiss newspaper Basler Zeitung, BIS chief Agustin Carstens sharply criticized the notion of cryptocurrencies — describing them as “a bubble, a Ponzi scheme, and an environmental disaster.”
This is not the first assault launched on cryptocurrency by Carstens — Mexico’s former finance minister and central bank governor.
In early February 2018, the BIS chief argued the case for (cryptocurrency) “policy intervention” on the basis the assets raised “concerns related to consumer and investor protection”.
In his speech at Frankfurt’s Goethe University, Carsten cited what may be perceived as a deep-seated fear that cryptocurrency could debase the role of central banks:
Private digital tokens masquerading as currencies must not subvert this trust (in central banks)
To Inflate or not to Inflate?
Such rhetoric would appear to fit well with Carstens’ role of chief at BIS. As an umbrella organization owned by 60 of the world’s central banks, cryptocurrencies have emerged as a direct challenge to what BIS describes as the promotion of “monetary and financial stability through international cooperation”.
Since its inception in 1930, the Switzerland-based BIS has a long history of financial intervention — having implemented the post-WWII remedial Bretton Woods System, and emerged to provide emergency funding to nations in financial turmoil (Mexico and Brazil, 1982 and 1989, respectively).
Where Bitcoin and other decentralized cryptocurrencies have emerged to eliminate financial crises using transparent, unalterable circulating supplies — they are not the answer, according to Carstens.
Historically, the BIS chief has had a preference for financial intervention. Faced with 2009’s plummeting oil price, the then-Mexican finance minister hedged the nation’s oil sales for $70 a barrel to avoid a severe fallout.
Describing the role of central banks, Carstens stated:
Money is, so to speak, the oil that makes the machinery work. But this system is fragile. Problems quickly arise when there’s too much or too little money in circulation. It’s the central banks’ job to forestall such problems.
In closing, Carstens emphasized that no medium could substitute the trust placed in central banks and appealed for young people to “stop trying to create money”.
Cover Photo by TheDigitalWay on Pixabay