Crypto Has Lost Against Fiat Currency: BIS Chief Agustin Carstens

Last year’s crypto collapse and a series of related bankruptcies have undermined the claim that tokens can be as reliable as any legal tender

The head of the Bank for International Settlements (BIS) Agustin Carstens says that the argument that crypto is an alternative to fiat currency has been settled following last year’s turmoil in the digital-asset sector. Last year’s crypto collapse and a series of related bankruptcies have undermined the claim that tokens can be as reliable as any legal tender. 

BIS chief Agustin Carstens in a Bloomberg TV interview said, “That battle has been won...a Technology doesn’t make for trusted money.”

He said, “Only the legal, historical infrastructure behind central banks can give great credibility.” 

The collapse of Sam Bankman-Fried's exchange FTX in November last year, which has evolved into one of the most high-profile corporate crime cases in US history, has left the digital asset sector still licking its wounds. This $2 trillion rout also caused a $2 trillion slump in the market. For instance, Bitcoin is now worth $24,150, down 65 per cent from its peak of almost $69,000 in 2021, reported Bloomberg. 

Carstens said that Crypto is a financial activity that can really only exist “under certain conditions.”

Carstens also said that central bank digital currencies or CBDCs and tokenized deposits can aid efficiency. He proposed the model of a unified blockchain under a public-private partnership where a central bank underpins trust in CBDCs.

Carstens also mentioned private-sector stablecoins. Regulatory authorities, according to him, must make sure stablecoins don't hurt consumers and investors or divide the monetary system.

Stablecoins are digital currencies that are designed to maintain a specific value, such as $1, however, some of them have overvalued themselves and caused losses for investors.

Carstens also spoke about the idea of a mandatory system, a unified programmable ledger, which seeks to provide the foundation for a contemporary financial system. According to him, the goal is to integrate new technologies and speed up the creation of a financial system in the future that lowers transaction and compliance costs and makes it easier to onboard more users.

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