Head of Bank for International Settlements Calls For Clampdown On Cryptocurrencies

Central banks must clamp down on Bitcoin and other cryptocurrencies to  stop them “piggybacking” on mainstream institutions and becoming a  “threat to financial stability,” Agustín Carstens the head of the Bank  for International Settlements stated, FT reported.

 Carstens, condemned Bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster.”

 His comments come after weeks of backlash against cryptocurrencies by  mainstream financial institutions contributed to a steep fall in the  price of Bitcoin.

Bitcoin extended its recent losses on Monday morning, briefly falling  below $6,000 per coin, down more than $13,000 from its peak in December  before recovering.

 “To date, many judges that, given cryptocurrencies’ small size and  limited interconnectedness, concerns about them do not rise to a  systemic level,” Carstens said in a speech at Goethe University in  Germany on Tuesday morning. 

 “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,” Carstens added. 

Carstens, the former head of Mexico’s central bank, conceded that many  of the world’s main central banks have closely examined the potential to  transform their own operations using blockchain, or distributed ledger  technology (DLT), which is the underlying technology behind  cryptocurrencies. 

“In practice, central bank experiments show that DLT-based systems are  very expensive to run and slower and much less efficient to operate than  conventional payment and settlement systems,” Carstens said. 

Carstens argued that the “mining” process to create new Bitcoins uses  the same amount of electricity as Singapore each day, Carstens added,  “the current fascination with these cryptocurrencies seems to have more  to do with speculative mania than any use as a form of electronic  payment, except for illegal activities.” 

This comes as the G20 prepares a meeting where world leaders are  expected to talk about cryptocurrency regulations in March, News  Bitcoin reported. 

The G20 includes central bankers and leaders from 19 countries and the  European Union, spanning the entire globe: Argentina, Australia, Brazil,  Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico,  Russian Federation, Saudi Arabia, South Africa, South Korea, Turkey,  United Kingdom, and the United States. 

Last year, France Finance Minister Bruno Le Maire agreed with his  colleague stating cryptocurrencies are a threat to the current financial  structure and they need to be regulated. 

There is evidently a risk of speculation,” French Finance Minister Bruno  Le Maire continued. “We need to consider and examine this and see  how…with all the other G20 members we can regulate Bitcoin.” 

More recently in the U.S. in early February, Treasury Secretary Steven  Mnuchin indicated he was planning to raise the subject of cryptocurrency  regulation speaking at the Senate Banking Committee, Coindesk reported. 

This came before a hearing in the U.S. by J. Christopher Giancarlo,  chairman of the Commodity Futures Trading Commission, and Jay Clayton,  his counterpart at the Securities and Exchange Commission (SEC),  testified on Capitol Hill.  Both stated they were  “open” to federal  regulation of cryptocurrency exchanges, Coinivore reported. 

Bitcoin is currently trading at [FIAT: $10,273.50 ] according to Coin Market Cap at the time of this report. 

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