General Manager of Bank of International Settlements (BIS) Agustin Carstens has given his opinion on the role cryptocurrencies play in the economy.
According to Carstens, cryptocurrencies are mostly used to commit crimes and should be strictly regulated. Carstens, who aired his view in a CNBC show, said digital currencies were mostly used to execute arbitrage trades and contravene government regulations.
Crypto Is A Speculative Vehicle
To him, the growing use case of cryptocurrencies in criminal activities is worrying. He also mentioned that regulations against money laundering and terrorist financing were clearly missing in crypto applications.
Carstens’ views on cryptocurrencies are some of the reasons why several countries have refused to adopt virtual currencies wholesale.
Nations like China have outrightly banned private crypto ownership, instead opting for central bank digital currencies (CBDCs) controlled by the apex bank, the People’s Bank of China (PBoC). Chinese officials have even gone ahead to arrest residents who use cryptos to evade taxes.
India is another country that has taken a stand against Bitcoin, citing volatility as its reason. The Indian government is already looking to outlaw crypto-assets in the country in the latest crypto bill it will present to parliament this year.
However, Bitcoin and other cryptocurrencies have enjoyed a remarkable year so far. The crypto market hit a trillion-dollar valuation in Q1 2021, and major altcoins like Ethereum are quickly expanding their use cases. Investors are rapidly joining the crypto bandwagon as institutional demand has surged.
US Treasury Secretary Janet Yellen is a well-known critic of cryptocurrencies. Yellen, who has picked on Bitcoin severally, admonished the US government to curtail cryptocurrencies given its propensity to be used for criminal activities. The Federal Reserve’s former chair also criticized digital assets for the highly volatile nature and noted that they were unfit to replace cash.
Crypto No Threat To Central Banks
Carstens said crypto’s high volatility qualifies it as a “speculative tool” and not a replacement for cash. According to the Mexican economist, this singular attribute makes it harmless to the well-established financial system.
Carstens also said that the dominance of cryptocurrencies (cyber currencies, as he calls them) had not been established as digital assets have not been able to usurp the exchange value of cash.
But despite the indifference legacy financial institutions have shown crypto, many industry experts see it as a “shaking up” of an already morbid financial climate. And the central banks are also taking notice.
In a published report that saw the likes of the Bank of England, the European Central Bank, and the US Federal Reserve participating, the BIS said that 20% of global apex banks are already initiating a CBDC program.
In its final notes, the report recommended that CBDCs serve a more secondary role to fiat and should be integrated into extant payment systems.