The Bank for International Settlements issues a warning, “Dangers of crypto are materialising”
The Bank for International Settlements (BIS) has reaffirmed its scepticism of the new asset class, citing the recent destruction of the whole bitcoin market as evidence.
According to a June 21 story by Reuters, the global central bank group will warn in its next annual report that the recent crypto crisis demonstrates the present realisation of the perils of decentralised financing (DeFi).
According to Agustin Carstens, general manager of the BIS, the recent collapses of the TerraUSD (UST) stable coin and a 70 percent reduction in the price of Bitcoin (BTC) were symptoms of a systemic issue inside the cryptocurrency market.
Moreover, Carstens argues that no form of money can have legitimacy unless it is governed by a government-backed institution “that may deploy tax-funded reserves.” As he elaborated:
“I believe that all of the previously identified flaws have been realised. You absolutely cannot resist gravity… At some time, you must actually face the music.”
In addition, the BIS head said that the crypto meltdown was not anticipated to cause a systemic catastrophe in the same manner that subprime mortgages precipitated the global financial crisis. However, he did emphasise that it would result in significant losses.
In addition, he emphasised the opaque nature of the cryptocurrency market, which, according to him, exacerbates uncertainty, stating: “According to what we know, it should be doable. However, there are many things that we do not know.”
In its study, the BIS also urged more focus on the development of acceptable central bank digital currencies (CBDCs), whose deployment has been tested in a number of nations, including China, where citizens have received digital yuan from the government as part of these trials.
The criticism of the critic
However, the BIS general manager came under fire from “The Bitcoin Standard” author and Lebanese American University assistant economics professor Saifedean Ammous. Ammous tweeted on June 21, 2014:
“A fleshball that favours junk food above its own health asks that you entrust your family’s fortune to it and its unelected monopoly banker cronies. Forever.”