Bitcoin

BIS Bitcoin Critic Says Banks Shouldn’t Create Crypto Tokens

Anti-Bitcoin Banker Says Banks Shouldn’t Create Tokens

Agustin Carstens, the general manager at the Bank for International Settlements, said that banks shouldn’t issue their own bitcoin-like tokens because it could undermine global financial stability, as well as monetary policy, according to a report by Bloomberg.

In the past, Carstens has called Bitcoin “a bubble, a Ponzi scheme and an environmental disaster.” He said if banks issued similar currency it could lead to people moving money away from commercial banks. A move like this could potentially undermine the whole system, he said.

There are other downsides to central bank-issued digital currency (CBDC), he explained. It could potentially alter how interest rates affect demand for money, and it could produce larger central bank balance sheets, a consequence that would make it necessary for asset buildup which could affect market liquidity.

“There are huge operational consequences for central banks in implementing monetary policy and implications for the stability of the financial system,” Carstens said. “Central banks do not put a brake on innovations just for the sake of it. But neither should they speed ahead disregarding all traffic conditions.”

As cryptocurrencies rise in popularity, there’s been a drop in cash for payments in places like Sweden. This has led to many banks wondering if they should issue digital currencies to supplement banknotes.

The Swiss National Bank said it saw no reason to do so, but a handful of central banks are expected to issue their own currency in the next ten years.

Earlier this year, CNBC reported that JPMorgan Chase introduced the first cryptocurrency from a major bank based in the United States.

It’s called JPM Coin and it’s geared toward the firm’s wholesale payments business, a segment that moves $6 trillion globally. The digital coin is designed to settle payments instantly between the bank’s customers.

CNBC said the move comes as at least some banking operations across the industry are transformed in part by blockchain, which might change the way everything from debt to cross-border payments gets done, and where speed is of the essence. The use of crypto in international payments will be among the first real-world use cases done with a bank – and will be centered on institutional use (rather than sold to retail customers).

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