The head of the influential Bank for International Settlements has cautioned authorities, particularly central banks, that they must be prepared to act against the "invasive spread" of cryptocurrencies to safeguard consumers and investors and preserve financial stability.
Speaking in a lecture in Frankfurt, BIS General Manager Agustín Carstens said that for money to keep its value, it must be supervised by accountable institutions — in this case, central banks— that enjoy public trust. "Private digital tokens masquerading as currencies must not subvert this trust," he added.
Although new technologies hold great promise, Carstens said new currencies are not needed for that promise to be realized. He also dubbed bitcoin "a combination of a bubble, a Ponzi scheme and an environmental disaster."
Cryptocurrencies such as bitcoin have gathered criticism from banking officials all over the world, and financial institutions have taken steps to address the issue, with some even blocking bitcoin operations from their services. Bitcoin fell below $6,000 on Feb. 6, down from highs near $20,000 barely a month earlier.
So that they do not become "parasites," central banks and financial authorities should pay attention to the links between digital currencies and real currencies, Carstens said, adding that only entities "that meet accepted high standards" should be given access to legitimate banking and payment services.
