BIS (Bank of International Settlements) General Manager, Agustin Carstens, has been at it again. This time arguing against Central Bank Digital Currencies at the Central Bank of Ireland’s Annual Whitaker Lecture.
BIS: Vested Interest In Legacy Systems
Agustin Carstens really doesn’t want anything to upset the status quo. You know, the one in which he’s the head of Bank for International Settlements – the central bank of central banks. It’s also an organization that makes a fortune if there isn’t an easy and cheap way to make international payments. You know, like, for example, cryptocurrency.
The annual lecture celebrates Ken Whitaker, champion of economic reform, and governor of the Irish central bank from 1969-76. With either a complete lack of self-awareness, or a masterful grasp of post-modern irony, Carstens started with a reference.
Whitaker, along with other European central bankers, petitioned the BIS to include representation from more countries on its board. According to Agustin:
I’m afraid the BIS was not very receptive at the time: it saw any expansion as a slippery slope.
Central Banks Can Design Their Own ‘Cryptos’
Carstens then took the audience on a thought experiment, to see what a world with central bank digital currencies (CBDCs) might look like (though fiat currencies today are already overwhelmingly digital). The focus was on central bank digital currencies as a cash substitute. He suggests that there is no urgent need for this as “for most countries, cash is still in high demand,” but banks want to be prepared.
Superficially, for the consumer, there would not seem to be much change, other than all payments being electronically. However, a CBDC would not necessarily be anonymous, and unlike cash, it could pay or charge interest.
Of course, if a central bank is designing it then it could be anonymous, and it wouldn’t have to pay or charge interest. In fact, if a central entity issues their own cryptocurrency, they can pretty much design it in any way they want. And wasn’t anonymity one of Carsten’s issues with Bitcoin?
He then went on to suggest that moving from a two-tier system, whereby customers deal with commercial banks, to a one-tier system, where customer hold accounts directly with the central bank, could cause upheaval and chaos. But again, there is no reason that the central bank should hold customer accounts directly, or that commercial banks should cease to exist.
CBDCs Would Boost Bitcoin’s Credibility
Even in the abstract for the speech, the BIS employs a level of disingenuity bordering on straight-up lying. It claims that “only a very few central banks think it is likely that they will issue a CBDC.” But the very same abstract states that “about 70 percent [of central banks are] either exploring or experimenting with so-called central bank digital currencies.”
In fact, 10 percent of central banks say they are likely to issue a CBDC in the next 6 years, with 5 percent likely within 3 years. Almost 40 percent think a CBDC is possible in the next 6 years; after all, there is a reason that 70 percent of them are exploring the possibility.
But Carstens would like to dissuade central banks from any move, which could impact the current system. Because change could, of course, make his position obsolete.
The central banker is likely also aware of the fact that if CBDCs become a thing, then it would also add to Bitcoin’s credibility, cementing it as a viable alternative to the legacy banking system.
Images courtesy of Shutterstock, Bitcoinist archives
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