General Manager of the Bank for International Settlements, the central banks' bank, says authorities must be 'prepared to act against the invasive spread of cryptocurrencies'

Authorities must be prepared to act against the invasive spread of cryptocurrencies to protect consumers and investors, Bank for International Settlements (BIS) General Manager Agustín Carstens said.

In a lecture "Money in the digital age: what role for central banks?", Carstens 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," 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."

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, 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," 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, Carstens said.

"This means 'same risk, same regulation'. And no exceptions allowed," he said.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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72 Comments

Crypto-currencies are the biggest scam the planet has ever seen

Except for ponzicoin - that is legit right?

Bitconnnect! Intro https://www.youtube.com/watch?v=xK3yuxrmCac warning turn your sound down a lot.

Gif to explain the company without sound: http://i.imgur.com/yJa5B9V.gif
Or the office clip with sound https://www.youtube.com/watch?v=BAeaqeN-shs

.. true ... but can you explain to me why Carstens thinks cr*ptocurrencies are an environmental disaster ..

Dairy farming , yes .... freedom campers , yes ... it's easy peasy to see and smell how they wreck the environment ... pooping to XS ... poopy pooping left right and poopy centre all over our fine land , girt-by-sea ...

.. but cr*ptocurrencies ?

Because mining it uses truckloads of electricity (estimated to consume as much as Ireland) to produce absolutely nothing.

... ah , yes ... two techy geeks said something similar to me some time ago ... they reckoned it's nigh on impossible to mine out the remaining several million buttcoins ...

Doris ; thanks for jogging my memory ... whew , now I'm tuckered out from the run !

Not so much impossible as uneconomic.

If the cost of mining a coin exceeds the value of the mined coin then there will be no mining.

Which brings in the next option from mining to staking the lottery where the biggest players win.

People are raised on dairy products, gummy bear hero

.. true ... but we had environmentally friendly small scale dairying for over 100 years ... and we still were reknowned for our butter exports ..

Until the formation of Fonterrible , and the emergence of giant industrial dairying ... then the sh*t hit the fan ... and everything else downstream from the fan ...

Well for ages the corrupt, unethical and fraudulent wanted a market system with no regulations. Before and after they got caught out with the GFC, there were mandatory regulations and legal requirements. No wonder a rise of a new unregulated market popped up, which had really easy techniques to manipulate a whole world of new marks. Not really the biggest guess as to why it has been so successful even though the sales pitch is the funniest thing to geeks who know what the technology entails. That does not mean people cannot make money off a corrupt system. Often it is easier because the lack of regulation allows for much greater movement and funnelling of funds. Bit of a blow that when the NZ news was pumping out stories with actors in place of real people to push a cryptocurrency sales pitch and there were warnings from investment leaders of a bubble (when your taxi driver/ shoe shine boy is giving you stock tips it is time to get out), that many people brought the promise of unrealistic gains and unethical sales pitches hook, line and sinker. Many brought in the past few months, some even brought using credit cards & mortgages, and were told to always hold regardless of risk, volatility and market dynamics. If anything there was ample opportunity for someone to do the ethical thing and encourage due diligence and better controls. Unfortunately the community fuelled by a bubble often has a poor apprehension of ethics, integrity, research and technology. The Dot com boom was similar, lots of people buying on a name and advertising pitch, poor disclosure of actual risks and lots of shills. If anything the lack of regulation has removed what little protections there were and lowered the barrier needed to set up a good scam. Sad because the ideals were such a pretty fairytale.

"Well for ages the corrupt, unethical and fraudulent wanted a market system with no regulations"

Haha...who, the major banks?

Think more laterally. You have an entire ecosystem of organisations to consider. Often taking the same roles as those in the existing markets.

You obviously don't understand how the USD works then?

What are the the safest assets to preserve your wealth in today's world where money is just a piece of paper and can be printed relentlessly.

Certainly no expert based on mistakes that i have made,however i would say land is the best asset.
Especially land that has its own water supply.
Even if values go down you have land for growing food,land for feeding stock and if your lucky timber for building.
You don't need a 2 million dollar house on land worth 500k as many sellers have found out.
Possibly your biggest asset is yourself and family.

I think your biggest asset is your health (both physical and mental). Without good health your productivity through whatever avenues, and definitely your enjoyment in life will not be at their potential. Anything after that a bonus.

Indeed with health you can have a basic income & life, without health you are left to poverty and donations. Hence why most disabled live in shocking conditions, cannot get work and have poor community access. However the difference between ACC disabled and otherwise disabled e.g. genetic, cancer, autoimmune etc is striking in even just the basics for living.

The answer is always the same - diversify to reduce risk. I personally haven't stretched to diversifying into crypto because I don't consider it an investment, just a gamble.

Not much difference between money and Crypto currencies....
Neither are backed by anything.

Governments and Central Banks have an issue here as if the start placing the same rules on crypto currencies as money then they are legally giving the crytpo currencies a legal status.

Crytpo Currencies can hide from authorities so can avoid regulation and taxation.....

Governments may find themselves having to get smaller and spend considerably less as crytpo currencies offer protection against government and state intrusions.......that may leave land and buildings as the only item a government can get any tax off.

Interesting that some countries are buying or have bought large amounts of gold.....massive changes could well be in the air.

Actually there are a load of differences. Obviously the biggest being that the NZ government (and NZ citizens) have a big interest in keeping the NZD as stable as possible. That is why I can buy pretty much the same things with one NZD as I could last year, and I can be fairly confident that will apply next year too. Unless you live somewhere like Zimbabwe, you can probably put a lot of trust in your currency. I wouldn't put any trust in bitcoin...

The NZD is not backed by anything. It is paper money that is all.

Crypto currencies will go up and down, some will not last any length of time.

I'm kind of liking the idea of having my own bank with my own account on my computer....with all the numbers in my head.........

Not everyone is going to like cryto currencies and that is great because the governments will rely on you.

The NZ dollar is backed by an under populated country with an enormous amount of assets per capita such as food and timber production etc.

Why then has it fluctuated from 37 cents to 88 cents in the last 17 years?

Did we have more timber back then?

Because the true base for our wealth has not been correctly recognised by the stupid "market".

or they are focusing on the 550 billion of debt.

The NZD is backed by the NZ govts reputation, and that is backed by the NZ govts ability to reach into our pockets and tax us.

Bitcoin is backed by the hopes and dreams of delusional kids that think govts around the world are going to let a currency that cant be tracked and therefore taxed exist for any length of time once it rises above the nuisance level of transaction volume.

Most stable countries have had a currency that has stood the test of time for hundreds of years. The proportion of stable countries that have had a currency collapse would be tiny. I’d much rather trust standard currency as a means of preserving value than crypto currencies, some of which as you say will not last any length of time. Unless of course you are gambling on making money from crypto, in which case sky city is probably more trustworthy.

what rubbish!

money is legal tender backed by an economic model for sustainability (I admit that money is not perfect and governments often make bad choices).

Cryptos have no real value are not backed as legal tender and are always have their value assessed against " REAL MONEY"

It is a huge speculative bubble that only fools would consider an investment.

I predict they will all crash to nothing, back into the thin air in which they were created.

I agree that gold is still a rock solid investment that has lasted the test of time and continues to grow its usefullnes

Money is only a means of exchange......nothing more......

That Legal Tender that you talk of can be taken by the Reserve Bank in an OBR event at any time they fancy. Given the number of countries with bail in policies then I'd expect that many people will want to have the ability to have some control rather than a central bank being in charge.

The sustainable economic model you talk of is nothing more than forward works from the productive sector......with over 50% being syphoned off for public and state spending......there is nothing sustainable about this model.......it is only the goodwill of the hard working that is keeping it going.........

If one doesn't want the enforced model of a government's monetary system then they have a choice due to crypto currencies and that choice will be what drives these crypto currencies........who is going to know who has what and where?

Crypto currencies might be speculative but everything in life is speculative.........

"It is a huge speculative bubble that only fools would consider an investment".

And yet, people who are considered by most others to be very very financially astute (Winkelvoss Twins) made $1 billion dollars from it.

I bet your not worth $1 billion

How gullible and uninformed. Oh the financial nous of venture capital investing of $11mil and keeping the other 90mil+. How would they have survived if it went bust? They may only be able to afford 2 multimillion dollar yachts and a plane to share. Do you know even know of the billions that get blown on VC funding or the expected attrition rate?

There is a major difference between crypto and fiat.

There is no limit to the amount of a fiat that can be issued whereas there is a finite limit to the amount of (i.e.) bitcoins that can ever be issued.

And that is the raison d'etre for cryptocurrency.

Nah just fork a new one for next months pump and dump cycle.

Hmm.

"Wealth preservation" is perhaps more of a philosophical discussion than it is a technical one.

First, it would be best to define how you as an individual conceptualise wealth -- for me personally, I find myself in agreement with the essay penned by R. W. Emerson on Wealth. So I would say that wealth is the ownership or acquisition of some object or right (tangible or intangible) that has transferable utility.

Perhaps what you are really asking is how to preserve the parity of utility.

This is probably the same question that was asked when the US dropped the gold standard, and was answered with the petro-dollar system.

Short answer:

Unless you believe that the US is going to (somehow) collapse, the US dollar is probably the safest place, and will generally reserve parity of utility so long as the world needs oil.

Edit: *** so long as the world needs oil, and the US is prepared to invade and or bomb any oil-producing country that tries to sell oil in anything other than US dollars.

You seem to be under the misapprehension that moving to a more corrupt and manipulated market would be a good option. Exchanges are far worse than banks, and ICOs far worse and more fraudulent than existing company startup fundraisers and many have stolen money from their customers (not including the ones that just got hacked because they had incredibly poor security). It is hilarious that you don't know the "mainstream" media and those opinion blog sites you read are bank rolling checks from advertisers, many of whom are cryptocurrency businesses trying to throw their nets to catch more unwary fish. Actually the cryptocurrency "news" sites often are the worse with direct financial ties and inducements to keep pumping so the whales can safely make their positions better and cash out.

We've been dabbling in Cryptos for 6 years and Pacifica is correct. Whatever the potential was or is for blockchain and/or cryptos and/or alternative currencies and banking, what currently exists is dodgy as f%#k.

Many pump and dump ICO's were nothing more than theft. And who could stop them in the unregulated world of cryptos? Who could you possibly trust? Where is the come back if someone steals from you? Who is responsible? Where is the recourse? Of course, once upon a time people asked those questions about banks too. Banks didn't just appear overnight, ready baked with government and population having faith in them! Once they were unregulated, plenty of times they have caused people to lose their money and there were older generations who swore never to risk placing their money in a bank and kept it under the mattress!

It's possible that cryptos could eventually stabilise and develop in to something sustainable. Mainly because so many people are invested in it and NOT just with their wealth....many are invested on a deeply psychological level. There are millions of young people who have lost faith in institutions, who are looking to create their own alternatives, and there exists an almost a religious zeal to some coiners. It's not a simple ponzi or scam (although I agree those certainly exist and are very common), cryptos represent something valuable to young people who are deeply cynical and mistrustful of mainstream banking. They don't just invest in cryptos for potential profit, there is a deep desire to circumnavigate and reject existing systems and to create something new.

I read so many comments here from people who clearly know nothing about cryptos. They don't understand that it represents to many, much more than an asset, they've never participated in the forums or sub reddits and they don't realise that cryptos are a symptom of a deep yearning to reject the current structures of power. The GFC was not a economic crisis for these people, it was THE example of a corrupt system. The fact that the system was protected, bailed out, has further increased the sense of cynicism, mistrust and disenchantment.

I don't encourage anyone to get in to cryptos, or suggest that they do answer any of the problems that are brewing....but equally, much of the hyperbole I read here is very shallow and without much understanding of the culture of cryptos at all.

Indeed. Unfortunately ethics is a bit of a stickler in our house, we could no longer have faith in the industry now showing or having any ethics. The cryptocurrency market & development is rife with a money first at any cost attitude, especially in the dev teams. In engineering & science industries that level of knowing & intent to deceive is incredible. But hopefully the future potential will help create more opportunities with blockchain tech and introduce limited customer rights and protections. Very much like the evolution of lower level VC and Kickstarter like, crowd based funding for startups. Sure many startups can falter but since they are not bricks and mortar the ability for the company owners & devs to pivot to another project is easier. At the moment one of my main exchanges has had unscheduled sudden downtime for over a day and that does not bode well though. Service provisioning for customers is so shoddy.

So you don't any coins is what you are trying to say?

Breaking News - Bitcoin up 8% - MORE SOON

Down 50%, up 8%.. how high does a dead cat bounce anyway?

Paddles or a lowly moggie?

You seem to be spending more time thinking about Jacinda and Jacinda-adjacent entities than Clark Gayford does. This can't be healthy.

My wife said the same thing. I replied that until someone comes up with an app that can block any mention of her in my media feeds it will be the proverbial stone in my shoe. I feel like the only sober person at a party wondering what the other people have been smoking.

Oh well, makes a change from us having to watch the emperor in his new clothes from 2008 to 2016.

Touche - so you know the feeling? Not pleasant is it? A bit like your spendthrift ex partner winning lotto. You wonder whether you are atoning for sins in a past life. I must have been particularly bad.

Let it go, sweetie. She's moved on.

Given I've previously stated I'm male and in a hetero normative relationship you're barking up the wrong tree with that moniker.

Nobody's casting aspersions on your masculinity, cupcake.

What exactly has she done to this point to get you belly aching so much? It's not like she's raised GST

You know there is help for that. Until then perhaps modifying the browser add on Stop Tony Meow so you can have a safe space zone free from images & text that might trigger you.
https://www.theguardian.com/world/australia-news-blog/2014/feb/06/replac...
add on site: http://stoptonymeow.com/

Down and up..Pretty much like fiat, shares and gold..whoops not gold that is fixed by the masters ...BREAKING NEWS Bitcoin up 11% More soon

just lost 10% in the last hour .... more soon!!!!

hahahahaha hahahaha

Wake me up when it either replaces the world's currencies or disappears completely.

You obviously missed the math where a % rise is significantly lower than the same value of a % fall. With a fall of up to 20%+ in a day there is a serious hole in your false sense of security.

Shucks thanks for your concern...bitcoin is here to stay...and I could cash out tomorrow and still be ahead. Its free money at this stage so we can see how it pans out over the year.

up
11

Bitcoin started life as an underground means-of-exchange to "alternative lifestylers" and silk-roaders, and hiders and anti-big-govts. It was artsy. It wasn't main-stream. Then beginning 2016 somebody started pumping-and-dumping style social-media news-drops extolling the virtues of being independant from the blood-suckers and out of the clutches of the vampire-squids - has a certain elan to it - a sort of drain-the-swamp feel to it

Then Beijing'ers started using it to get loot out of Beijing

Then it got big -- then it went wild

And now the Bank of International Settlements wants to clamp down on these invasive critters

They would, wouldn't they - is this the first real sign crypto-currencies are gaining traction? (legitimacy)

You make me feel like a hipster; our family got into it "before it was mainstream". Banks also were working on blockchain projects years before 2016. Really it is mostly a fashion now, like a game fad. With all the science and engineering being stripped away bit by bit. If anything it is now a playground to test predatory AI against naive human bait. Yeah we see the different algorithms and manipulation as interesting on a mathematical and psychological front but it still leaves you with the feeling of being somewhat dirty for participation at any level.

ngakonui gold, tell the Japanese that land is the best asset and they will laugh you out of the room, land values have declined 60% approximately since 1990. Anything that can be bought with credit is always risky, particularly if it doesn't produce an income.

You're totally right. Land values are completely at the whims of government policy. A land tax offsetting a decrease in GST and/or income tax would solve a lot of our issues and significantly reduce land values.

Couldn't comment on Japanese land as i know nothing about it.
I can only comment on land in NZ and i don't know much about that either.

Then why comment at all?

This is too easy today.

Because i can courtesy of Interest.co.nz

Ngakonui Gold....you talk about what can be produced on the land, so control of the means of production is what is important. Ownership is not necessarily the same as control.

Example required please.I know some land is classified industrial etc so you wouldn't buy that land.

Look a comment from the middle man!

Better to trust bulletproof code and consensus than the corrupt central banks and the fractional reserve banking system.

Trillions were conjured out of thin air by these banksters and handed to boomer asset holders while the young and the poor were told to go whistle.

Central bank mandated inflation is legalised theft.

Bitcoin has been already been superseded but digital assets and currencies aren't going away, because central bankers like this clown have shown they cannot be trusted.

The comments in here read like a bunch of clueless braying old dinosaurs sometimes.

Next time you are paying your bloated mortgage ask yourself what this mortgage is backed by... it may suprise you to find it's also... nothing.

Competition is bad, must be banned.

Bloomberg reporting that 20% of cryprocurrencies were bought with debt products.