The Bank for International Settlements (BIS) returns to attack, which ensures that cryptocurrencies lost the battle against fiat money (paper, such as the dollar or the peso). Meanwhile, however, the price of bitcoin continues to rise.
But let’s see how the head of the BIS, the Mexican Agustín Carstens, puts it: due to its lack of stability and general acceptance as a means of payment, cryptocurrencies have lost the battle against fiat money.
In an interview with Bloomberg, the former governor of the Bank of Mexico (Banxico) affirms that the argument that cryptos are an alternative to fiat money was buried after the turbulence that the digital asset sector went through in 2022.
Stability is a key requirement for any form of money, and virtual currencies are essentially unstable due to their high volatility, plus they face the challenge of mainstream acceptance as they are used by a minority of the population and not they are admitted to many businesses, says the head of the bank of central banks. There is no doubt that he is right (still).
According to Carstenscryptocurrencies are not suitable as a means of payment due to their decentralized nature and the lack of a central authority that can guarantee its acceptance, since people need to trust a “trustworthy” third party to facilitate transactions, which is impossible with this type of currency of which -like bitcoin- it is not even known who was its true creator.
And although he also accuses that the lack of regulation of the virtual currency market has led to an increase in financial crimes, including the washed of money and the financing of terrorism, proposes that governments and regulators work together to ensure the crypto universe is regulated and properly supervised.
At this point, he says, the BIS is committed to innovation in the financial market, including the blockchain technology that underlies many cryptocurrencies, but clarifies that this change must be balanced with financial stability and consumer protection.
For this purpose, the BIS has established a working group aimed at exploring the potential of blockchain technology and how it can be used effectively in the financial sector. In fact, a “strong statement” from the Group of 20 (G-20) is anticipated to strengthen regulation of digital assets, which is good news for apologists for decentralized money.
In the words of Carstens: “Only the legal and historical infrastructure behind central banks provides great credibility to money. The crypto sector is a financial activity that can only really exist under certain conditions.”
In this sense, very diverse experts from the financial environment such as Ben Richmond, CEO and founder of CUBE, point out that in order for cryptos to continue to innovate and, at the same time, have solid regulations that protect the consumer, industry leaders, politicians and legislators must work together, rather than separately.
A collapse of the unregulated digital asset market could have effects similar to the mortgage in 2008, or even worse, one day, warns the leader of that “regtech” firm.
Crypto have lost battles, but they will win the “war”
It should surprise no one that the monetary authorities and, even more so, the “central bank of central banks”, the BIS, oppose the adoption and use of cryptocurrencies. They are monopoly lovers of money and do not like competition.
Deep down, however, they have no choice but to recognize that blockchain technology – on which bitcoin, the first of the cryptos, is based – is a financial advance that cannot be ignored.
Hence, it is only a matter of time before CBDCs (official central bank digital currencies) become a reality all over the planet, and then there will be no valid argument to ban decentralized or private cryptocurrencies.
Of course, even the staunchest defenders of cryptos must be clear that they are a monetary experiment that is by no means guaranteed success. It is undeniable that its inherent volatility will complicate its adoption as universal money, since it is not possible to set prices for a currency whose value changes all the time.
And contrary to what many believe, their regulation will contribute to making them more used and accepted by people, which in the future could help to eliminate part of their volatility. But even if that were not the case, they will still be conducive vehicles for generating capital gains for those who use them to speculate intelligently, as we do here in the Premium community of this Top Money Report financial newsletter.
Editor’s Note: This text belongs to our Opinion section and reflects only the author’s vision, not necessarily the High Level point of view.
William Beard Master in Economics from the Austrian School; liberal, gold market specialist and editor of investment newsletter Top Money Report