The argument that cryptocurrencies are an alternative to fiat money got buried after the turbulence that the digital asset sector went through last year, according to Agustín Carstens, director of the Bank for International Settlements.
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“That battle has been won“Carstens said in a Bloomberg TV interview on Wednesday. “One technology doesn’t make reliable money.”
The digital asset sector still licks the wounds of the US$2 trillion collapse and the November collapse of Sam Bankman-Fried’s FTX exchange, which became one of the highest-profile corporate crime cases in US history.
Bitcoin, for example, fell 65% to $24,150 from a peak near $69,000 in 2021. The cryptocurrency crash and a series of related bankruptcies undermined the claim that tokens can be trusted as stores of value and a means of exchange.
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“Only the legal and historical infrastructure behind central banks provides great credibilityto money, Carstens said, adding that he anticipates a “strong statement” from the Group of 20 to strengthen regulation of the digital asset sector.
The crypto sector is a financial activity that can only really exist “under certain conditions”, said. Carstens also spoke at the Monetary Authority of Singapore and said that central bank digital currencies, or CBDCs, and tokenized deposits can help efficiencies.
He proposed the model of aa unified blockchain under a public-private partnership where a central bank sustains trust in CBDCs. In his speech, Carstens referred to private sector stablecoins. He said regulators need to ensure that stablecoins do not harm investors and consumers or fragment the monetary system.
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Stablecoins are cryptographic tokens that are meant to have a fixed value, say $1, but some have exploded, charging investors with losses.
Bloomberg
