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BIS Says Crypto Weaknesses Materialized After Market Selloff – Featured Bitcoin News

ByHazel R. Lang

Jun 23, 2022

The Bank for International Settlements (BIS), the global body for central banks, says previously reported weaknesses in crypto “have all but materialized.” BIS Chief Executive Agustin Carstens said: “You just can’t defy gravity… At some point you really have to deal with the music.

BIS on Crypto Weaknesses

The Bank for International Settlements (BIS) has warned that a perceived danger of decentralized digital currency is materializing.

The BIS explained in its annual economic report, published on Tuesday, that the crypto market sell-off and the collapse of the cryptocurrency terra (LUNA) and the stablecoin algorithm terrausd (UST) are indicators of a structural problem in crypto.

“Structural flaws make the crypto universe unsuitable as the basis of a monetary system: it lacks a stable nominal anchor, while the limits of its scalability lead to fragmentation. Contrary to the narrative of decentralization, crypto often relies on unregulated intermediaries that pose financial risks,” reads the BIS report.

Agustin Carstens, the chief executive of the BIS, said in an interview with Reuters on Tuesday that any form of currency ultimately lacks credibility without a government-backed authority that can use tax-funded reserves. He issued the following opinion:

I think all of these weaknesses that were pointed out before have pretty much materialized.

The BIS executive continued, “You just can’t defy gravity… At some point, you really have to face the music.”

Carstens does not believe that the crypto market crash will cause a systemic crisis in the same way that bad loans triggered the global financial crash. He detailed:

From what we know, this should be quite manageable. But, there are many things we don’t know.

The BIS executive then talked about central bank digital currencies (CBDCs). In a report released in May, the BIS said nine out of ten central banks around the world were exploring their own digital currencies.

“This is a topic that has been on the G20 agenda for some time,” Carstens told the outlet, adding that there is “a good chance it will move forward.” He pointed out that some countries have already conducted “real world” trials with their central bank digital currency.

Carstens thinks there will be international standards for CBDCs “within the next two years”, noting that 12 months is probably “too short”.

This week, the BIS Innovation Hub announced that its Eurosystem Center projects will explore cryptocurrency markets. Citing that “the collapse of many stablecoins and decentralized financial (defi) lending platforms has highlighted the difficulty of assessing their risks and economic potential,” the BIS described: “The aim of the project is to create an open source market information platform to shed light on market capitalizations, economic activity and risks to financial stability.

What do you think of the comments of BIS Director General Agustin Carstens? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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