EDITOR NOTE: It’s easy to spot badly-dressed propaganda when you read it. Take the Bank of International Settlements’ Agustin Carstens. He claims that cryptocurrencies should be regulated (read: centralized and controlled) because criminals and terrorists use them to better hide their illegal transactions. According to a Chainalysis report, the criminal share of all crypto activity stood at 0.34% in 2020. In 2019, it made up only 2.1% of all transactions. Sure, we can say that black market figures are hard to pin down. But the same goes for the BIS unless it somehow has figures that are more accurate. If so, how would they know, and why haven’t they published their “evidence”? Chances are good that the majority of criminal transactions are exchanged in fiat--not gold, not crypto, not oil, cigarettes, or beaver pelts. In addition to this, Cartens claims that crypto coins are “used to do some arbitrage.” Okay, so what? You can do arbitrage in stocks and futures, or better yet, eBay and Amazon. His other argument is that cryptos tend to “circumvent some regulations.” You can’t “circumvent” a regulation that’s not yet enforced--as if the regulation pre-exists a legal authority that it doesn’t yet have. Besides, what’s the purpose of regulation if there is no real threat of a crime. It would be regulation for regulation's sake. And that expresses the core impulse of centralist institutions. They regulate for the sake of regulating. It’s circular. It’s asinine. It’s typical of centralist governance. And it's for this very reason that we invest in non-CUSIP gold and silver. We want to take our money out of a system that aims to regulate for its own gain under the false pretenses of morality, progress, and humanitarian interests.
Cryptocurrencies are used to evade laws and should face more regulation, according to the general manager of the Bank for International Settlements (BIS).
Many digital coins are “used to do some arbitrage, or to circumvent some regulations,” Agustin Carstens told CNBC’s Joumanna Bercetche in an interview aired Wednesday.
He added that laws against money laundering and the financing of terrorism were “absent in many applications of some cyber currencies.”
Bitcoin and other virtual currencies have seen huge gains over the last year, as investors looked to diversify their holdings in the coronavirus pandemic. Bitcoin bulls view the token as a sort of “digital gold,” claiming it can act as an inflation hedge in times of economic crisis and massive stimulus.
However, cryptocurrencies have also gained a reputation for their involvement in illegal activities. They are pseudonymous, making it harder to track down who is making transactions. Earlier this year, U.S. Treasury Secretary Janet Yellen said the government would need to “curtail” the use of crypto for criminal transactions.
Bitcoin is up more than 80% since the start of the year, though it’s down about 12% from a record high above $61,000 earlier this month. Ether, another digital coin, has more than doubled year-to-date, but is down 18% from its all-time record of over $2,000.
Cryptocurrencies are notorious for being subject to wild swings in price. Carstens said he thinks cryptocurrencies are being used as a “speculative vehicle” and doesn’t see them as a threat to central banks and the established financial system.
“I don’t see any dominance of cyber currencies,” he said, adding cryptocurrencies haven’t made “any inroads in terms of working as money.”
“Stablecoins also have some limited applications,” Carstens said, referring to digital coins that are tied to external assets like the U.S. dollar to minimize price volatility. “They have their own role for very specific purposes. Therefore, I don’t see any challenge … to sovereign money coming from these privately used currencies.”
His comments arrive as various central banks around the world are exploring their own digital currencies. China has led the pack, trialling its digital yuan in a number of cities, while Sweden’s central bank is also considering whether to introduce a digital version of its krona currency as cash usage declines rapidly in the Scandinavian country.
Last year, the BIS and several central banks including the U.S. Federal Reserve, European Central Bank and the Bank of England published a report laying out some key requirements for central bank digital currencies, or CBDCs. They recommended that CBDCs compliment, not replace, cash and other forms of legal tender, and support rather than harm financial stability.
Central banks’ push toward digital currencies was catalyzed in part by Facebook’s plan to introduce its own token in partnership with other private companies. Initially called Libra but now known as Diem, the project drew an instant backlash from regulators around the world due to worries that it may undermine sovereign currencies.
That’s because of the huge reach of Facebook in particular, which is used by well over 2 billion people. Carstens warned that stablecoins like libra would need be strictly regulated.
“The issue of what is backing those currencies is of the essence,” he said. “We have many, many episodes in the history of finance where, something that is supposed to be completely backed, at the end it doesn’t end up being fully backed.”
There have long been fears that tether, one of the most widely used stablecoins today, may not have had enough cash reserves to back all the tokens in circulation. Ifinex, the parent company of Tether and crypto exchange Bitfinex, recently reached a settlement with the New York attorney general’s to end an investigation into the firms over this issue.
“I think we need to work on regulation so that these instruments are fit for purpose,” Carstens said.
Originally posted on CNBC