This article was originally published at Mintdice.com
The rise of Bitcoin and the blockchain industry has been accompanied by criticism, just like any other emerging tech sector. Such criticism was heard during the dawn of the internet, and despite it, the internet is still alive and well today. Industry experts have offered different hot takes on the nature of cryptocurrency in general, calling it everything from a bubble to a Ponzi scheme. The latest well-known figure to criticize the cryptocurrency industry, however, is Agustín Carstens, head of the Bank for International Settlements, also known as the central bank for all central banks.
What Agustin Carstens says about Cryptocurrency?
According to Carstens in a recent interview, young people should stop trying to create money in the form of cryptocurrency. The Bank for International Settlements’ opinion on cryptocurrency may not gain any traction within the community because things have been improving for the cryptocurrency. Banks and large corporations have been warming up to the blockchain, the underpinning technology of most cryptocurrencies.
Corporations like IBM have developed enterprise platforms and partnered with cryptocurrency platforms like Stellar to provide blockchain-based payment solutions. Several significant partnerships have also been made between cryptocurrency platforms and banks. Even with the fear of fraud and theft, banks realize that there is profit to be made from the industry and if their customers decide to trade, they may have no choice but to cooperate.
During the interview, Agustín Carstens was asked if cryptocurrencies can be described as money. He replied by explicitly stating that cryptocurrencies are not money, rather they are a type of asset that can be invested in. By Carstens’ description, these digital assets can’t assume the functionality of money in the economy due to the way they are created.
Carstens has stated that this is a bad model for money and simply does not maximize its usefulness. Money is supposed to be a great store of value, means of payment and unit of account. However, so far, digital assets like cryptocurrency have proven to fail badly at all three things.
This is not the first time that Carstens has openly criticised Bitcoin and the cryptocurrency industry. In fact, he gave a talk on the topic at the Goethe University in Germany in early 2018, stating that central banks must work hard to stop the rise of cryptocurrency. This would ensure that the technology does not meddle with the finance industry and affect the financial stability of various world economies.
He also spoke about the difficulties associated with working with Distributed Ledger Technologies (DLT) in central banks, including the lack of efficiency, the expensive costs, and the slow speeds. Prior to this, Mario Draghi, president of the European Central Bank, expressed his own opinion on cryptocurrencies calling them risky assets. He also stated that the European Central Bank is continuously working to identify threats and dangers that cryptocurrency may pose so that they are mitigated before any harm can be done.
Many have argued that banks make money and are taking a hypocritical stand by telling others not to. The warning by Carstens will most likely not be taken seriously in light of the continuous flood of investors into the cryptocurrency space. Despite the volatility within the industry, cryptocurrency has come to be recognized as a way to invest and make a lot of money. As a result, demand for digital assets has increased over time and will continue to lead to an increase in supply, not the opposite scenario that Carstens is proposing.
Despite the bold statements by Carstens, the cryptocurrency industry has seen improvement in the number of projects, investors and amount of money raised through crowdfunding. Apart from the statements that tell young people to stop trying to make money, he raised some relevant points including the insecurity and expenses associated with running such networks. Another problem lies in the lack of stringent regulations within the industry to govern its many investment and trade practices.
Carstens continues to be outspoken about the Bank of International Settlements lack of support for cryptocurrency as a whole. Other experts in various financial and technological fields also continue to show mixed opinions on the subject. However, the recurring themes are rooted in regulation, theft, illegal activities and profits. Hopefully, cryptocurrency will get to a middle ground that makes security provision for users, regulators, like central banks and even law enforcement, easier.
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