That’s no exaggeration! It´s a true declaration of war, if you want to use this word in the financial sector. The Bank for International Settlements (BIS), which acts as the central bank of the central banks, today officially announced that authorities worldwide must be prepared to take action against “invasive dissemination of cryptocurrencies” to protect consumers and investors.
What does “invasive” mean? By this, BIS means the invasion or infiltration of the “normal” monetary system by non-state-regulated computing units, the cryptocurrencies. These therefore obviously threaten the stability of money issued by central banks (i. e. ultimately the Governments). BIS says at the very beginning of its publication: It´s all about protecting consumers and investors. Question: Why then are casinos not completely banned, where almost without exception the citizens only lose their cash?
And cryptocurrencies undermine the state’s monopoly on money, and thus the exchange of goods via the unit of fiatmoney. From a financial point of view, nothing worse could happen to a Government than losing control of it! Officially, it´s a question of trusting state-guaranteed currencies. And the people have confidence in this money (so the BIS says it), and we must have distance from such dubious things as cryptocurrencies, as we do in the case of fatal illnesses, right? Quote BIS:
In a lecture “Money in the digital age: what role for central banks?”, Mr Carstens (BIS President) said that for money to keep its value, it must be backed by accountable institutions which enjoy public trust. Here, central banks are key. “The meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust,” Mr Carstens said in the lecture in Frankfurt, organised by Sustainable Architecture for Finance in Europe (SAFE), the Center for Financial Studies and the Deutsche Bundesbank. “Private digital tokens masquerading as currencies must not subvert this trust.”
The fight agains the parasites, namely Cryptocurrencies
Is it the fear of the BIS and the central banks that is why they´re taking such massive action against cryptocurrencies here and now with these clear statements? BIS head Carstens spits, mocks and scolds against Bitcoin and Co. There is talk of a possible parasite in the financial system that must be prevented. Let’s guess: It’s the fear that the “ordinary citizen” might come up with the idea of establishing currencies (computer generated units) based on blockchain technology that works between citizens, past the state, past banks, past central banks. This would deprive citizens of state control, negative interest rates, surveillance and so on. But Carstens has already spoken the decisive word (killing argument): It´s also about combating money laundering, so he said it. And so it goes on. Read for yourself, here in the text:
New technologies hold great promise, for example in making payment systems more efficient. But new currencies are not required for that promise to be realised. Authorities have a duty to make sure technological advances are not used to legitimise the profits from illegal activities, and to educate and protect investors and consumers, Mr Carstens said. They must also ensure cryptocurrencies do not become entrenched and pose a risk to financial stability.
“Novel technology is not the same as better technology or better economics,” Mr Carstens said.
“That is clearly the case with Bitcoin: while perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, a Ponzi scheme and an environmental disaster.”
Large price swings, high transaction costs and a lack of consumer and investor protection make cryptocurrencies unsafe and unsuited to fill money’s role as a shared means of payment, store of value and unit of account, he said.
Central banks and financial authorities should pay particular attention to the ties linking cryptocurrencies to real currencies, and ensure they do not become parasites on the institutional infrastructure of the wider financial system. To ensure a level playing field for all participants in financial markets, access to legitimate banking and payment services should be limited to those exchanges and products that meet accepted high standards, Mr Carstens said.
“This means ‘same risk, same regulation’. And no exceptions allowed,” he said.
BIS PresidentAgustín Carstens. Photo: International Monetary Fund – Protraits of the IMF 2008 Spring Meetings, International Monetary Fund / Public Domain