BIS Head Bemoans Crypto and Stablecoins as Phony Money

Agustín Carstens argued that cryptocurrencies do not meet the standards expected of money.

Man showing off his stablecoin outside of BIS bank. Mr Agustín Carstens watching from the building, unimpressed.
Created by Kornelija Poderskytė from DailyCoin
  • Agustín Carstens pushes CBDCs over crypto and stablecoins.
  • Only central banks can manage the money supply, claims Carstens.  
  • The uptake of CBDCs remains low.

Cryptocurrency burst onto the scene as a new peer-to-peer paradigm for money that promised to disrupt the monetary system overseen by central banks. While cryptocurrencies have made strides over the last decade, central banks have been hard at work developing their own digital currencies to reassert their role as the primary stewards of money.

Bank of International Settlements (BIS) general manager Agustín Carstens recently re-emphasized that central bank digital currencies (CBDCs) are the most viable solution for modernizing money in an increasingly digital world. According to Carstens, CBDCs offer a more efficient and secure alternative to cryptocurrencies and stablecoins.

BIS General Manager Slams Crypto

Setting the scene in his address at the BIS Innovation Hub-Financial Stability Institute conference on September 27, Carstens acknowledged that cryptocurrencies and stablecoins have emerged as a new type of private digital money while the use of cash continues to decline. However, Carstens argued that neither qualifies as real money.

The BIS general manager argued that cryptocurrencies and stablecoins are not endorsed by central banks, meaning they offer no guarantee of finality or support from the central bank as the lender of last resort. Similarly, Carstens implied that the legitimacy of cryptocurrency is somewhat murky, considering they lack “a reliable regulatory and supervisory framework.”

Stablecoins offer a remedy to the volatility that plagues cryptocurrencies, and recent times have seen them gain traction as a legitimate form of payment, including the introduction of stablecoin regulatory frameworks in Singapore and the US. However, Carstens played down the significance of this by raising the point that “stablecoins do not assure stable value” about their tendency to de-peg.

“They [cryptocurrencies and stablecoins] do not and cannot meet the standards the public expects of money,” declared Carstens.

While Carstens dismissed cryptocurrencies and stablecoins as inadequate forms of money, his speech glossed over the challenges CBDCs face regarding low adoption.

No-One Uses CBDCs 

Nigeria’s CBDC program has been labeled a failure due to the very low adoption rates since its launch in October 2021, with recent figures showing that only around 0.5% of Nigerians have used the e-naira.

Likewise, the uptake of China’s digital yuan pales compared to existing digital payment methods, according to data from the Foreign Policy Research Institute, which showed 261 million individuals had set up a digital yuan wallet versus 904 million regular users of mobile payment solutions such as WeChat Pay.   

Former Fox News anchor Clayton Morris summed up the general aversion toward CBDCs by calling them a power play for absolute control on the part of governments. Morris urged his fellow Americans to bombard their local representatives and voice their concerns about the digital dollar.

On the Flipside

  • Concerns over the potential for state control and reduced financial autonomy persist despite the push for CBDCs by some central banks.  
  • Decentralized networks are inherently more resilient than centralized ones, making cryptocurrencies and stablecoins a more secure form of money than CBDCs.

Why This Matters

The stage is set for a showdown between cryptocurrencies and CBDCs. This battle will be decided on trust, and in an age of dwindling trust in authorities, CBDC adoption faces an uphill battle

Find out how US politicians intend to derail the digital dollar here:
CBDC Anti-Surveillance Act Gains Momentum in US Congress

Learn how to stay safe following the Chase Bank crypto ban here:
What Now After Chase Bank’s UK Crypto Ban?

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Samuel Wan

Samuel Wan is a finance professional turned crypto journalist, known for his insightful reporting on market trends, regulatory changes, and technological developments within the digital asset industry. His ability to simplify complex concepts and report the facts has made him a trusted source in the crypto community. Beyond his writing, Samuel is an active mountain biker and gamer.