Comments /
{{hitsCtrl.values.hits}} Views / Wednesday, 7 February 2018 00:00Frankfurt Main (AFP): The head of the Bank of International Settlements, the central bank for central banks, on Tuesday lambasted bitcoin as a speculative bubble and said authorities need to be ready to protect public trust in the financial system.
While acknowledging the intention of bitcoin’s developers to create an alternative payment system with no government involvement, “it has become a combination of a bubble, a Ponzi scheme and an environmental disaster”, said BIS’s general manager, Agustin Carstens.
Delivering a lecture co-hosted by Germany’s central bank, Carstens said that authorities need to be vigilant as cryptocurrencies could undermine the public trust in the financial system.
While cryptocurrencies, led by bitcoin, soared in value last year, authorities in most countries stood on the sidelines, while in some countries they embraced the technology that promises to cut the costs of financial transactions.
But as the value of bitcoin -- the best-known virtual currency -- has tumbled from its December high of nearly $20,000 to less than half that value with wild daily swings, regulators have taken a more critical outlook.
China recently vowed to fully stamp out cryptocurrency trading after cracking down on it late last year. South Korea has also cracked down on cryptocurrency exchanges to reduce the risk of money laundering.
Carstens said the volatility of cryptocurrencies undermined their utility for transactions and a store in value, thus apparently leaving their main use as a means for criminals to move money.
“If the only ‘business case’ is use for illicit or illegal transactions, central banks cannot allow such tokens to rely on much of the same institutional infrastructure that serves the overall financial system and freeload on the trust that it provides.” He called for particular vigilance in allowing cryptocurrencies to “piggyback” on the financial system with links to regular bank accounts.
A number of leading US and British banks have recently announced bans on purchasing bitcoin and other cryptocurrencies with credit cards.
Bitcoin trading exchanges, which function like brokerages and hold their client balances, have proved targets for hackers, with a Japanese exchange Coincheck hit by a $530 million heist last month.
Carstens, formerly the head of Mexico’s central bank, said that cryptocurrencies may not yet pose a systemic risk.
“But if authorities do not act pre-emptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” he said.
1. All comments will be moderated by the Daily FT Web Editor.
2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.
3. We may remove hyperlinks within comments.
4. Kindly use a genuine email ID and provide your name.
5. Spamming the comments section under different user names may result in being blacklisted.
Saturday, 16 February 2019
It is 10 years since Justice Saleem Marsoof (JSM) and his committee was appointed to review and make recommendations to reform the Muslim Marriage and Divorce Act (MMDA), passed originally in 1951 and amended in 1954, 1955, 1965 and 1969 before becom
Saturday, 16 February 2019
The talks over the “Wall of Trump” between the US-Mexico Border Security broke down with Congressional leaders over the weekend. After the renewed call for a wall at his second State of the Union, President Donald Trump attended a political rally
Friday, 15 February 2019
‘The Man Who Would Be King’ is the title of a long tale written by Rudyard Kipling in 1888. This very popular story was made into a successful film starring Sean Connery, Michael Caine and Christopher Plummer by the well-known director John Husto
Friday, 15 February 2019
I despair of our politicos and would-be politicians. Not that they are not all honourable men. From the honourable prime minister to the former defence secretary discharging his duty honourably after premature retirement! But that honour often dresse