Agustin Carstens, general manager of the Bank for International Settlements gave a lecture calling on central banks to monitor Bitcoin. While it’s obvious that there is tension between global financial institutions and cryptocurrency, the debate currency debate still rages. Central bankers’ skepticism is understandable — cryptocurrency may be undermining the power of central banks and changing the way we transact.
Real value of fiat currency
Carstens gave a lecture at the Goethe University in Frankfurt am Main, Germany. During his presentation, the banker drew attention to how tech innovation and the popularity of cryptocurrency affect finance — especially central banks. He emphasized the need to supervise virtual currencies and protect the “real value” of fiat currency.
The banker reiterated that money is inextricably linked to national governments and therefore operates on a socially accepted convention. Public trust in a central authority makes money worth something. He’s convinced that central bank regulation and supervision was the most effective strategy.
Central bankers are notorious for their views on crypto. Carstens is no different. His lecture’s theme displayed distrust in cryptocurrency. The banker does not understand how solving “mathematical puzzles” can be the basis for building social trust among strangers. This is, of course, the basis for the value of currencies and the whole system of their exchange. He believes that Bitcoin is fraudulent, economically ineffective, and untrustworthy.
After all, “only a few programmers and a catchy name can create a crypto,” notes Carstens, after which he states that the newly emerging crypto coins only diminish the value of the existing ones – if they have any economic value at all. In his view, the trust and value that people have in cryptocurrency stem from centralized cryptocurrency exchanges. These exchanges, Carsten argues, mirror how traditional financial institutions function.
Need for regulation
Carstens concluded his lecture by commenting on Bitcoin. He considers it completely inefficient as an alternative payment system since it isn’t under a government’s or bank’s control. Carsten argues that central banks, finance ministries, tax authorities, and other financial institutions should supervise digital currency on an ongoing basis in order to protect consumers and investors and prevent potential financial catastrophe.
Moreover, the general manager of the Bank of International Settlement believes that since cryptocurrencies operate on classical economic mechanics, they should remain under the guardianship of regulatory institutions. This is the main conclusion of Agustín Carstens’s views. Unfortunately, one cannot help but think that the majority of representatives of the great world of finance and politics have a similar stance.