The Director General of the Bank for international settlements (BIS), Agustin Carstens (Agustin Carstens) made at the University of Goethe lecture «Money in the digital age: what role for Central banks?».
During his speech, Carstens said, «We witnessed a small shift in the center of banking. This shift is due to the latest technological developments. The rapid growth of bitcoin and other cryptocurrencies has led us to the need to revise some of the fundamental issues that affect the origin and meaning of the existence of Central banks.»
During his speech, Carstens said that the money is directly linked to the government that it is «an indispensable social norm that is supported by a reporting institution in a state which enjoys public confidence». Then he said:
«Private digital tokens that represent the currency, such as bitcoin and other cryptocurrency assets that have emerged in recent times, must not jeopardize this trust in the fundamental values and nature of money.»
He also insisted that «free competition is not a good approach in banking or in the issuance of money. The paradigm of strict banking regulation and supervision and Central banks to monitor financial and monetary system that emerged over the last century, was the most effective way to avoid instability and high economic costs associated with the proliferation of private and public money.»
Ignoring the technology of distributed registry that underlies bitcoin, Carstens said:
«Who would have thought that that fact is the mathematical equivalent of a mega-Sudoku, will be the way to achieve consensus between strangers around the globe via a proof of work? Could this be the new solution to the problem of how to achieve trust between people who don’t know each other?».
Then he said that bitcoin has three «obvious fault». The decline in values, he argues, is the result of forks, creating an infinite number of versions of Bitcoin, which according to Carstens are inflationary.
«In the end, it’s just a bunch of smart programmers and memorable name. As in the past, these new versions reduce the value of the current, if it is possible suggests that cryptocurrencies generally have any economic value,» he says.
Any trustworthy cryptocurrency appeared through centralization, through trade with Fiat currency on exchanges, he said. «In General, they agree on the same institutional infrastructure that serves the overall financial system and the confidence it provides. This reflects the problems of cryptocurrency in establishing their own trust system in the face of cyber attacks, the loss of customer funds, restrictions on the transfer of funds and insufficient market integrity.»
Carstens believes that bitcoin in particular, seems to be completely ineffective:
«Although he intends to become an alternative payment system without the participation of the government, he has become something of a cross between a bubble, a pyramid scheme and environmental disaster.»
«Under this government all the more eager to curb the risks associated with cryptocurrencies. There are serious arguments in favor of political interference. As has been noted by many securities markets and regulatory bodies, these assets can cause problems related to the protection of consumers and investors. The relevant authorities have a duty to educate and protect investors and consumers and should be ready to act,» he concluded.