Speaking to Swiss newspaper Basler Zeitung last week, subsequently published by BIS itself, general manager Agustin Carstens cautioned “young people” against “trying to create money,” drawing comparisons to Bitcoin mining...
Glance back into the past and you will see that creating gold or money from nothing has been a regular obsession. It never worked. Even the great physicist Isaac Newton was at one point in his life obsessed by alchemy and the idea of making gold. He was very successful in a number of fields, but in this one he failed. Newton ended up as head of the British Mint. Why? Because he could detect at once if a coin was counterfeit. After he failed in his attempt to make gold, he switched sides and sent counterfeiters to prison.
So my message to young people would be: Stop trying to create money!
“Those who have the biggest incentive in the system of these so-called cryptocurrencies are those who produce the assets - the miners… This incentive, however, is not compatible with maximising the usefulness of money,” he told the publication.
“Cryptocurrencies do not fulfil any of the three purposes of money. They are neither a good means of payment, nor a good unit of account, nor are they suitable as a store of value. They fail dramatically on each of these counts.”
The BIS had caused outrage when it published an article dealing with cryptocurrency in June, mainstream media widely reporting its highly suspicious outlook on the phenomenon versus fiat currency.
Keep writing FUD like this. In the attempt to discredit crypto-currencies you are only discrediting yourselves.— Andreas M. Antonopoulos (@aantonop) June 18, 2018
BIS: Bitcoin could bring Internet to a halt
Along with identical concerns over its potential to function as “money,” the article also feared that mass adoption of cryptocurrency could “bring the internet to a halt” and other controversial claims.
"Cryptocurrencies are... a bubble, a Ponzi scheme and an environmental disaster."
Continuing the narrative, Carstens, who has himself come out as a cryptocurrency bear on multiple occasions, said it would unequivocally not have a “happy ending.”
“...No need to beat about the bush on that count. One mustn't forget that central banks have been providing electronic means of payment for decades,” he continued.
First, that interest rates could rise too quickly. Not because of central banks, but as a reaction to market dynamics. This could considerably complicate the normalisation of monetary policy and ultimately threaten financial stability.
Second, I'm worried about the increasing protectionism in global trade. The entire dialogue on this issue is not constructive. One shouldn't forget that global trade is essential for global growth; the benefits it brings for the economy as a whole are undisputed. I fear that we could very soon end up in a lose-lose situation, as the protectionist measures on the table will be damaging first and foremost to export-oriented countries - above all, those that themselves impose no or only minimum tariffs. In a global economy based on the division of labour, however, they also affect suppliers or domestic producers that depend on the import of semi-finished products. And in the end it's always the consumer who has to pick up the tab, in the form of higher prices and less job security.
And third, I'm concerned by the pace of technological progress. In principle, it's a positive thing. But when innovation hurtles ahead, it can be destructive, for workers in particular. The challenge lies in using innovation to our advantage while containing the damage it causes. Here I'm thinking, for example, of the impact of information technology in finance - fintech - on, say, the business models and ultimately the stability of banks and other financial institutions. This is one of the topics we address in this year's Annual Economic Report. But the challenges involved are of course greater and concern the economy as a whole.
Judging by the level of animosity from Carstens, it seems clear that The BIS is very worried about the possible disruptive effects on their monopoly position from the cryptocurrency space.