‘Can’t Defy Gravity’, Crypto Fears Finally Materialize: International Banking Organization

Crypto fears are materializing now, central bank body BIS says

Recent implosions in cryptocurrency markets indicate that the long-warned dangers of decentralized digital currency are now materializing, the Bank for International Settlements has said.

The BIS, the global apex body for central banks, issued the warning in an upcoming annual report, in which it also called for more efforts to develop digital currencies that appeal to central banks.

BIS Chief Executive Agustin Carstens pointed to recent collapses of TerraUSD and luna “tablecoins” and a 70% drop in bitcoin, the barometer of the crypto market, as indicators that there is a problem. structural.

Without a government-backed authority that can use tax-funded reserves, any form of money ultimately lacks credibility.”

“I think all of these weaknesses that were flagged before have pretty much materialized,” Carstens told Reuters. “You just can’t defy gravity… At some point you really have to face the music”.

Analysts estimate that the overall value of the crypto market has fallen by more than $2 trillion since November as its troubles snowballed.

Carstens said the collapse is not expected to cause a systemic crisis in the same way bad loans triggered the global financial crash. But he stressed that the losses would be significant and that the opaque nature of the crypto universe fueled uncertainty.

“From what we know, it should be quite manageable,” Carstens said. “But there are a lot of things we don’t know.”

Central Bank Digital Currencies (CBDC)

The BIS has long been skeptical of cryptocurrencies and its report sets out its vision for the future monetary system – one in which central banks use the technological advantages of bitcoin and its ilk to create digital versions of their own. currencies.

About 90% of monetary authorities are now exploring CBDCs as they are called. Many hope this will equip them for the online world and push cryptocurrencies back. But the BRI wants to coordinate key issues such as making sure it works across borders.

The immediate challenges are mainly technological, similar to how the mobile phone world needed standardized coding in the 1990s. But there is also the geopolitical issue as relations between the West and countries like China and Russia are deteriorating.

“This (interoperability) is something that has been on the G20 agenda for some time…so I think there’s a good chance it will move forward,” Carstens said, adding that there is had had a number of “real-lives” with different CBDCs over the past year.

When asked how long until international CBDC interoperability standards are agreed, he replied, “I think within the next two years. Probably 12 months is too short.”

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