While US regulators appear to prefer a “balanced” approach to controlling the cyrptocurency space, and Fed officials “are not worried about Bitcoin,” it appears the new head of the so-called “central-banks’ central-bank” is most definitely concerned.
Bloomberg reports that in his first major public speech as head of the Bank for International Settlements, Agustin Carstens argued that central banks — along with finance ministries, tax offices and financial market regulators — should police the “digital frontier.” He said they must ensure a level playing field and functioning payment systems, and safeguard the “real value” of money.
“Bitcoin is not functional as a means of payment, but it relies on the oxygen provided by the connection to standard means of payments and trading apps that link users to conventional bank accounts,” Carstens said in Frankfurt on Tuesday.
“If the only ‘business case’ is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.”
Simply put, Carstens argues that there is a “strong case” for authorities to rein in digital currencies because of their links to the established financial system…
“If authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat,” he said.
“Most importantly, the meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust…”
“Private digital tokens masquerading as currencies must not subvert this trust.”
As a reminder, the BIS helps central banks pursue monetary and financial stability and while Carstens – who took over late last year after leading Mexico’s central bank – joins a list of establishment-types expressing reservations, his warnings are the most systemically serious so far with respect the truly disruptive nature of cryptocurrencies (as opposed to the usual ignorantly repeated narrative of criminality, ponzi-scheme, or worthlessness by so many.)