Bitcoin is speculation, not money, and facilitates financial crime, warns peak central bank
Bitcoin isn’t money – it’s a speculative asset that can be used by organized crime to launder money and launch ransomware attacks, according to the world’s largest organization of central banks.
- BIS says cryptocurrencies are shattering monetary systems in a negative way
- He urges central banks to consider issuing digital currencies for their citizens
- He says it’s important to maintain public confidence in monetary institutions
He urged central banks, such as the Reserve Bank of Australia (RBA), to develop their own digital currencies to meet the needs of citizens attracted to cryptocurrencies.
The Bank for International Settlements (BIS) has released a scathing assessment of cryptocurrencies, saying their growing popularity poses a problem for the global financial system.
Report in digital currencies
In a new report on digital currencies, the BIS encouraged the growth of “central bank digital currencies” (CBDCs), claiming that they digitally offer the benefits of central bank money – integrity, liquidity and settlement purpose – while maintaining the trust of the public in the monetary system.
But he warned that the landscape is changing rapidly, with increasing interest in alternative forms of currency.
“By now, it is clear that cryptocurrencies are speculative assets rather than cash and in many cases are used to facilitate money laundering, ransomware attacks and others. financial crimes, âhe said.
“Bitcoin in particular has few redemptive public interest attributes when you also consider its unnecessary energy footprint.”
Stablecoins and big tech
The BIS said other developments are contributing to the changing monetary landscape.
He distinguished between “stablecoins” and the entry of large technology companies (big techs) into payment services and financial services.
He warned that stablecoins – which are supposed to be pegged to a national currency, like the US dollar, to reduce volatility – come with their own problems.
“Stablecoins attempt to import credibility by being backed by real currencies. As such, they are only as good as the governance behind the promise of backing,” the report said.
“They also have the potential to fragment the liquidity of the monetary system and hijack the role of money as a coordinating device.
“In any case, to the extent that the purported support involves conventional money, stablecoins are ultimately only an appendage of the conventional monetary system and not a game changer.”
He warned that the entry of big tech into financial services could pose a huge problem.
He said the amount of data big tech companies have about their customers could be used to further empower their power as they move forward in financial services, using data from their existing companies in e-commerce, messaging. , social media or research, to give them a competitive advantage.
“The availability of massive amounts of user data raises another important issue – that of data governance,” the report says.
âBeyond the economic consequences, guaranteeing privacy against unjustified intrusions by commercial and government actors has the attributes of a fundamental right.
âFor these reasons, the issue of data governance has become a major concern of public policies.
âWhen asked American consumers in a representative survey who they trusted to protect their personal data, respondents said they trusted big tech the least,â he said.
RBA is already experimenting
In November, the RBA announced it has partnered with the Commonwealth Bank, National Australia Bank, Perpetual and ConsenSys Software (a blockchain technology company) to explore the potential use of a wholesale form of central bank digital currency (CBDC) .
He wanted to test how a CBDC could be used by wholesale market participants (i.e. other banks) for the financing, settlement and repayment of loans between the RBA and the other.
He is expected to publish a report on his pilot project in a few weeks.
However, the BIS said that if wholesale CBDCs were interesting innovations, if central banks offered digital currencies to retail customers, it would be a “bigger innovation”.
He said retail CBDCs have altered the conventional two-tier monetary system by making the central bank’s digital currency available to the general public, just as cash was available to the general public as a direct claim on the bank. central bank.
âRetail CBDCs come in two variations,â the BIS report says.
âOne option allows for a cash-like design, allowing so-called token-based access and anonymity of payments. This option would give individual users access to the CBDC based on a password-like digital signature using private-public key cryptography, without requiring personal identification.
âThe other approach relies on verifying the identity of users (‘account-based access’) and would be anchored in a digital identity scheme.
“This second approach is more compatible with the monitoring of illicit activities in a payment system, and would not exclude the preservation of privacy: the personal data of transactions could be protected from commercial parties and even from public authorities by designing appropriately the payment authentication process. “
History of the BRI
The Bank for International Settlements was established in 1930 by an intergovernmental agreement between countries such as the United States, United Kingdom, Switzerland, France and Germany.
Its original purpose was to facilitate World War I reparations imposed on Germany by the Treaty of Versailles, but it has evolved into a meeting place for central banks around the world.
Today, it is commonly referred to as the central bank of central banks because it provides banking services to central banks around the world.