Cryptocurrency fears are materializing now, central bank body BIS says

The BIS, the global umbrella body for central banks, has issued this warning in an upcoming annual report, calling for even greater efforts to develop digital currencies that are attractive to central banks.

BIS Chief Executive Agustin Carstens pointed to the recent collapses of the “stable currencies” TerraUSD and the moon, as well as the 70% drop in bitcoin, the flagship currency of the cryptocurrency market, as indicators of the existence of a structural problem.

Without a government-backed authority capable of utilizing tax-funded reserves, any form of money ultimately lacks credibility. “

“I think all of these weaknesses that were previously reported have pretty much materialized,” Carstens told Reuters. “You can’t defy gravity … at some point you really have to face the music.”

Analysts estimate that the overall value of the cryptocurrency market has fallen by more than $ 2 trillion since November due to its escalating troubles.

Carstens said the crash shouldn’t cause a systemic crisis, like the bad loans that triggered the global financial meltdown. But he pointed out that the losses would be considerable and that the opaque nature of the cryptographic universe fueled uncertainty.

“Based on what we know, it should be quite manageable,” Carstens said. “But there are many things we don’t know.”

CENTRAL BANK DIGITAL CURRENCIES (CBDC)

The BIS is long-term skeptical of cryptocurrencies and its report exposed its vision for the future monetary system, one in which central banks use the technological advantages of bitcoin and the like to create digital versions of their own currencies.

About 90% of monetary authorities are now exploring CBDCs, as they are called. Many hope this will equip them for the online world and push cryptocurrencies away. But the BRI wants to coordinate key issues, not least to make sure they work across borders.

The immediate challenges are mainly technological, just as the world of mobile telephony needed standardized coding in the 1990s. But there is also the geopolitical question, as relations between the West and countries like China and Russia are deteriorating.

“This topic (interoperability) has been on the G20 agenda for some time … so I think there is a good chance it will move forward,” Carstens said, adding that there has been a lot of testing in the “real world.” “with various CBDCs in the last year.

When asked how long international standards for CBDC interoperability could be agreed, he replied: “I think within the next two years. Probably 12 months is too short.”

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