The Bank for International Settlements wants to take action against Bitcoin and Co. The experts speak of a "threat to financial stability".
The Bank for International Settlements (BIS) calls for stricter regulation of cryptocurrencies such as Bitcoin. Central banks and supervisors need to intervene early to prevent a threat to financial stability, said the BIS Director General, Agustin Carstens, in Frankfurt according to a pre-published speech.
The BIS, based in Basel, is considered one of the most powerful institutions in the financial world. At the "Super Central Bank", the heads of the major central banks of industrialized countries meet regularly to determine the rules for the international financial system.
In his speech, the Mexican Carstens not only emphasized the important role of the central banks, but also urged them to act preventively. "The meteoric rise of cryptocurrencies should not let us forget the important role that central banks play as administrators of public trust," according to the text. "Private digital tokens that disguise themselves as currencies must not undermine that trust." Therefore, the central banks could not allow these cryptocurrencies to use the same infrastructure as the entire financial system and "parasitize" its confidence.
New technologies are very promising, such as the efficiency of payment systems, according to Carstens. But to fulfill these promises, it does not need new currencies. Strong price volatility, high transaction costs and lack of consumer protection made crypto currencies unsafe and unsuitable for fulfilling the functions of money. These functions are commonly used as a means of payment, processing unit and store of value.
Especially for Bitcoin Carstens found harsh words. Maybe this would indeed be considered as an alternative payment system that can do without the government. But it had become "a combination of speculative bubble, snowball system and environmental catastrophe".
The climb of the Bitcoin was followed in the past weeks by a sudden crash. From his record of nearly $20,000 in mid-December it is far away now. On Tuesday it fell below $6,000. One reason for the slump is the growing demand for regulation of a so far largely uncontrolled trade.
The concerns of Bitcoin supporters against stronger regulation are likely to increase again after the comments of the BIS chief.
Financial and regulatory authorities may need to intervene to ensure financial stability, Carstens said. "If they do not act preventatively, cryptocurrencies could become more intertwined with the main financial system and thus become a threat to financial stability."
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