The new head of the Bank of International Settlements (BIS), Agustin Carstens, gave an interview to Swiss publication Basler Zeitung at the end of June. As reported in the publication, his message to people in the crypto world was clear:
Glance back into the past and you will see that creating gold or money from nothing has been a regular obsession. It never worked. Even the great physicist Isaac Newton was at one point in his life obsessed by alchemy and the idea of making gold. He was very successful in a number of fields, but in this one he failed. Newton ended up as head of the British Mint. Why? Because he could detect at once if a coin was counterfeit. After he failed in his attempt to make gold, he switched sides and sent counterfeiters to prison. So my message to young people would be: Stop trying to create money!
The BIS was established over 80 years ago in an agreement with Germany, Belgium, France, the United Kingdom, Italy, Japan, the United States and Switzerland. It is known as “the central bank’s bank”. As such, these comments from its chief do not reflect well on crypto in the financial world. And this wasn’t Carstens’ last word on crypto either. He went on:
Cryptocurrencies do not fulfil any of the three purposes of money. They are neither a good means of payment, nor a good unit of account, nor are they suitable as a store of value. They fail dramatically on each of these counts. Cryptocurrencies are, in a nutshell, a bubble, a Ponzi scheme and an environmental disaster – the latter because of the high energy consumption needed to run the infrastructure for these cryptocurrencies.
Given the recent decline in value across the board for crypto – especially Bitcoin – there have been ongoing concerns that the industry may well have experienced a bubble at the end of 2017, when Bitcoin’s value rose to nearly $20,000 per coin. There have also been several high-profile pump-and-dump schemes as well as ongoing criticism from governments and eco-friendly industries that mining is not sustainable on a growing level. It should be noted though, that these issues are all being gradually tackled, with national regulation, green mining initiatives and more robust KYC policies all being put in place in recent times. So, the question is, is Carstens right?