Bank for International Settlements (BIS) Cautions Central Banks Against Issuing Digital Currencies


One of the sharpest critics of Bitcoin (BTC) has cautioned against the public release of central bank-issued digital currencies (CBDCs).

Agustin Carstens, the General Manager at the Bank for International Settlements (BIS), highlighted his opposition to such a move while speaking at 2019 Whittaker Lecture, according to a news report published by Bloomberg on March 22.

In his speech, Carstens points out that it is plausible to fathom a bank run occurring on the bank of central banks issuing their own CBDCs.

This, he said, could happen as a result of the public moving funds in troves from commercial banks accounts to new central bank accounts. It would effectively destabilize the financial system, he added.

The BIS General Manager is also reportedly against the use of CBDCs because there is “no clear demand from the society.” Again, Carstens feels that these digital currencies could impact interest rates and affect what informs public demand for money.

This, according to him, could see central banks end up with bigger balance sheets, necessitating a build-up of assets and thus affect market liquidity.

He also added that experiments using distributed ledger technology (DLT), ostensibly conducted by central banks, have not shown that the “new technology improves on the old.”

Another risk relates to operational consequences that would impact central banks’ implementation of monetary policies as well as further implications to the stability of the traditional financial markets.

Carstens also touched on the debate concerning central banks’ role in promoting new technologies and innovations, saying that:

“Central banks do not put a brake on innovations just for the sake of it. But neither should they speed ahead disregarding all traffic conditions.”

The BIS chief’s criticism of Bitcoin and crypto isn’t new, with his latest take likening bitcoin to “a bubble, [and] a Ponzi scheme.”

He also called it an “environmental disaster,” going on to urge central banks to tighten regulation of the crypto industry to prevent cryptocurrencies from becoming mainstream financial instruments.

Even then, a BIS report released in January revealed that about 70 percent of the world’s central banks have looked into CBDCs. However, a very small percentage of these banks say they could issue their own digital currencies within the next decade.

Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies.

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