New BIS Chief: Bitcoin and Cryptocurrencies can Never Function as Money
Bitcoin and altcoins are gradually going mainstream, with many governments of the world increasingly exploring its potentialities as a viable legal tender and equally building frameworks to protect investors. However, Agustín Carstens, the new chief of the Bank for International Settlements (BIS), sees cryptos quite differently.
Bitcoin will Never Become Money
Carstens has frantically dismissed the ability of cryptocurrencies to function as money or compete with the conventional monetary system. Carstens says purely profit-taking drives crypto creation, which prevents cryptocurrency from achieving the main functions of money. In an interview with Basler Zeitung, a mainstream Swiss-German newspaper, Carstens declared:
“Cryptocurrencies do not fulfill any of the three purposes of money. They are neither a good means of payment, nor a good unit of account, nor are they suitable as a store of value. They fail dramatically on each of these counts.”
The 60-year old economist and Mexico’s former minister of finance, is often referred to by Mexicans as Saint Augustine. He is highly respected in Mexico for saving the country from crashing into recession in 2009 after a severe slump in oil prices. His stance may not, however, go down well with the crypto community, as blockchain-based virtual currencies have been functioning as legal tender and store of value in several nations.
Cryptos not Special
Carstens strongly believes that cryptocurrency has not come to the table as fresh meat because central banks had adopted digital payment methods long before the advent of cryptocurrencies. “In Switzerland, for example, the National Bank’s electronic payment system is top of the line. I can’t imagine something coming along any time soon that would be more efficient and generate the same level of trust,” he said.
Beyond being uncomfortable with the crypto concept, the economist also thinks youth are making a mistake to delve into the cryptosphere. He believes that the quest of young people for innovating new monies of the 21st century is more an exercise in futility than reality, stating that past efforts to develop cash or even gold from basically nothing, have never been successful. “Glance back into the past, and you will see that creating gold or money from nothing has been a regular obsession. It never worked. So my message to young people would be: Stop trying to create money!” opined Carstens.
DLT is Useful, but…
Interestingly, the BIS chief admits that the benefits of blockchain technology cannot be written off, though he feels that being the foundation for bitcoin is not one of the strong qualities of the burgeoning technology.
“It is important to draw a clear distinction between the underlying technology, such as blockchain, and cryptocurrencies per se. The technology may have useful applications, but producing money is not one of them. Central banks and governments should raise the level of protection for investors and consumers. They can still show how these pseudocurrencies serve as vehicles for illegal activities.”
This is not the first time the BIS is making a vote of no confidence in the cryptocurrency sector, particularly on the belief that its structure could potentially collapse because of its non-scalable nature, as well as claiming that crypto has low chances of gaining public trust like that of traditional financial institutions.
Back in March 2018, BTCManager reported that the BIS had issued warnings to central banks against developing Central Bank Cryptocurrencies (CBCCs), as the move could be too risky for them.