The Bank for International Settlements (BIS), the global central banking body, claims that the weaknesses of cryptocurrencies that it has previously pointed out are “substantially realized.” Agustin Carstens, general manager of BIS, said: “You just can’t resist gravity…at some point you really have to face the music.”
BIS on encryption weaknesses
The Bank for International Settlements (BIS) has warned that the dangers of decentralized digital currencies are becoming a reality.
In its annual economic report released on Tuesday, the Bank for International Settlements explained that the sell-off in the cryptocurrency market and the collapse of the cryptocurrency terra (LUNA) and the algorithmic stablecoin terrausd (UST) are indicators of structural problems in the cryptocurrency.
“Structural flaws make the cryptocurrency world unsuitable as a foundation for a monetary system: it lacks a stable nominal anchor, while its scalability limitations lead to fragmentation. Contrary to the narrative of decentralization, cryptocurrencies often rely on invariants that pose financial risk. Regulated intermediaries,” the BIS report reads.
In an interview with Reuters on Tuesday, BIS managing director Agustin Carstens said any form of funding ultimately lacked credibility without a government-backed agency that could use the tax-funded reserves. he thinks:
I think all of these weaknesses pointed out earlier have been largely realized.
The BIS executive continued: “You just can’t resist gravity…at some point, you really have to face the music.”
Carstens believes that the collapse of the crypto market will not lead to a systemic crisis like the global financial crisis caused by bad loans. He detailed:
From what we know, it should be pretty manageable. However, there are many things we don’t know.
BIS executives continue to talk about central bank digital currencies (CBDCs). The Bank for International Settlements said in a report published in May, nine out of ten Central banks around the world are exploring their own digital currencies.
“This topic has been on the G20 agenda for a long time,” Carstens further told the news outlet, adding that “it is very likely that this will move forward.” He noted that some countries have already conducted “real life” experiments with their central bank digital currencies.
Carstens believes there will be an international standard for a CBDC “within the next few years,” noting that 12 months may be “too short.”
This week, the BIS Innovation Center Announce Its European System Center project will explore the cryptocurrency market. According to the BIS, “the collapse of many stablecoins and decentralized finance (defi) lending platforms has highlighted the difficulty of assessing their risk and economic potential,” describing the BIS: “The goal of the project is to create an open source market intelligence platform that to illuminate market capitalization, economic activity and financial stability risks.”
What do you think of the comments made by BIS General Manager Agustin Carstens? Let us know in the comments section below.
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