The Bank of International Settlements (BIS), the global body for central banks, claims that vulnerabilities in crypto were described as “too physical”. Agustin Carstens, general manager of BIS, said: “You can’t defy gravity … at some point, you really have to face the music.”
BIS on crypto vulnerabilities
The Bank of International Settlements (BIS) has warned that the threat of decentralized digital money is increasing.
The selloff in the crypto market and the collapse of the cryptocurrency Terra (LUNA) and the algorithmic stablecoin Terasad (UST) are indicators of a structural problem in crypto, the BIS reported in its annual economic report published on Tuesday.
“Structural flaws make the crypto universe unsuitable as the basis of a monetary system: it lacks a stable nominal anchor, while the limits of its scalability result in fragmentation. Contrary to the decentralization narrative, crypto often relies on unregulated intermediaries. which pose a financial risk,” the BIS report reads.
BIS general manager Agustin Carstens said in an interview with Reuters on Tuesday that any form of money without government-backed authority ultimately lacks credibility that can use reserves funded by taxes. They said:
I think all these vulnerabilities that were mentioned earlier have materialized to a large extent.
The BIS executive continued: “You can’t defy gravity… at some point, you really have to face the music.”
Carsten does not believe that a recession in the crypto market will lead to a systemic crisis in the same way that bad loans led to the global financial crash. He elaborated:
Based on what we know, it should be pretty manageable. But, there are many things that we do not know.
BIS executive talks about Central Bank Digital Currencies (CBDCs). In a report published in May, the BIS said that nine out of 10 central banks worldwide are exploring their own digital currencies.
“It’s a topic that has been on the agenda of the G20 for quite some time,” Carstens further told the news outlet, adding that “it has a good chance of moving forward.” He pointed out that some countries have already conducted “real life” trials with their central bank digital currency.
Carsten believes that there will be international standards for CBDCs “in the next few years”, noting that 12 months is probably “too short”.
This week, the BIS Innovation Hub announced that its Eurosystem Center project will explore the cryptocurrency markets. BIS said: “Many stablecoins and decentralized finance[डीएफआई]The collapse of lending platforms has highlighted the difficulty of assessing their risks and economic potential on market capitalization, economic activity and financial stability at risk.
What do you think of BIS general manager Agustin Carstens’ comments? Let us know in the comments section below.
image credit: Shutterstock, Pixabay, WikiCommons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation or recommendation or endorsement of an offer to buy or sell any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the Company nor the author is responsible, directly or indirectly, for any damage or loss alleged to be caused by or in connection with the use or reliance on any content, goods or services mentioned in this article.