Using the recent carnage that the entire cryptocurrency market went through as an argument, the Bank for International Settlements (BIS) once again reiterated its skeptical attitude towards the new asset class.
Specifically, in its upcoming annual report, the global central bank body warned that the recent crypto crash indicated the current materialization of the predictions about the dangers of decentralized finance (DeFi), Reuters reported on June 21.
According to the BIS general manager Agustin Carstens, the recent crashes of the TerraUSD (UST) stablecoin and a 70% drop in Bitcoin (BTC) price were the indicators that there was a structural problem within the crypto market.
Moreover, Carstens believes that no form of money can have credibility unless it is controlled by a government-backed authority “that can use reserves funded by taxes.” As he explained:
“I think all these weaknesses that were pointed out before have pretty much materialized. You just cannot defy gravity… At some point, you really have to face the music.”
BIS: ‘Won’t lead to a global crisis, but still bad’
Furthermore, the BIS chief also said the crypto crash was not expected to lead to a systemic crisis in the same way that bad loans triggered the global financial collapse. However, he did highlight that it would lead to substantial losses.
Additionally, he underlined the non-transparent character of the crypto market, which according to him, exacerbated uncertainty, stating that:
“Based on what we know, it should be quite manageable. But, there are a lot of things that we don’t know.”
In its report, the BIS also called for more attention toward creating suitable central bank digital currencies (CBDCs), the implementation of which some countries have been testing, including China, whose residents have been receiving digital yuan from the government as part of those tests.
Criticizing the critic
That said, the BIS general manager was heavily criticized by the Saifedean Ammous, Assistant Professor of Economics at the Lebanese American University and author of the book “The Bitcoin Standard.” In a tweet on June 21, Ammous stated:
“Fleshblob that prioritizes junk food over its own health demands you trust it and its unelected monopoly bankster buddies with your family’s wealth. Forever.”
BIS versus crypto
Criticizing crypto isn’t anything new for the banking authority, as it has recently released a bulletin in which it presented its view that “crypto cannot fulfill the social role of money,” and listed a number of problems it perceived in the crypto industry.
Back in December, Finbold reported on Carstens discussing the “break of the manifestation of non-bank financial intermediation” and the fact that he considered DeFi as “illusive,” devoting to it a section within the BIS’s quarterly review.