The argument that crypto is an alternative to fiat currency has been settled following last year’s turmoil in the digital-asset sector, according to Agustin Carstens, the head of the Bank for International Settlements.
“That battle has been won,” Carstens said in a Bloomberg TV interview on Wednesday. “A technology doesn’t make for trusted money.
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The digital-asset sector is still licking the wounds of a $2 trillion rout and the November collapse of Sam Bankman-Fried’s FTX exchange, which has morphed into one of the highest-profile corporate crime cases in US history.
Bitcoin, for instance, is down 65 percent to $24,150 from a peak near $69,000 in 2021. The crypto collapse and a series of related bankruptcies undermined the claim that tokens can be relied on as stores of value and mediums of exchange.
“Only the legal, historical infrastructure behind central banks can give great credibility to money,” Carstens said, adding he anticipates a “strong statement from the Group of 20 for strengthened regulation of the digital-asset sector.”
Crypto is a financial activity that can really only exist “under certain conditions,” he said.
Carstens also spoke at the Monetary Authority of Singapore, saying that central bank digital currencies — or CBDCs — and tokenized deposits can aid efficiency. He proposed the model of a unified blockchain under a public-private partnership where a central bank underpins trust in CBDCs.
Carstens touched on private-sector stablecoins in the speech. He said regulators must ensure stablecoins don’t harm investors and consumers or fragment the monetary system.
Stablecoins are crypto tokens that are intended to hold a set value, for example $1, but some have blown up, saddling investors with losses.
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