Crypto-fear is now showing up, says the central bank body BIS

LONDON, June 21 (Reuters) – Recent implications in the cryptocurrency markets indicate that long-term dangers of decentralized digital money are now materializing, the Bank for International Settlements has said.

BIS, the global umbrella body for central banks, issued the warning in an upcoming annual report, in which it also called for more efforts to develop attractive central banks’ digital currencies.

BIS general manager Agustin Carstens pointed to recent collapses of TerraUSD and luna ‘stablecoins’, and a 70% decline in bitcoin, the clock for the crypto market, as indicators that a structural problem exists.

Without a state-sponsored government that can use tax-funded reserves, any kind of money ultimately lacks credibility. “

“I think all these weaknesses that were pointed out earlier have pretty much materialized,” Carstens told Reuters. “You just can not defy gravity … At some point, you really have to face the music.”

Analysts estimate that the total value of the crypto market has fallen more than 2 trillion dollars since November as the problems have snowballed. read more

Carstens said the meltdown was not expected to cause a systemic crisis in the way that bad loans triggered the global financial crash. But he stressed that the losses would be large and that the opaque nature of the crypto universe fed uncertainty.

“Based on what we know, it should be quite manageable,” Carstens said. “But there are many things we do not know.”

CENTRAL BANK’S DIGITAL CURRENCY (CBDCs)

BIS is a long-term skeptic of cryptocurrencies, and the report set out its vision for the future monetary system – one in which central banks take advantage of the technical advantages of bitcoin and the like to create digital versions of their own currencies.

About 90% of monetary authorities now explore CBDCs as they are known. Many hope it will equip them for the online world and ward off cryptocurrencies. But BIS wants to coordinate key issues such as making sure they work across national borders.

The immediate challenges are mainly technological, similar to how the mobile phone world needed standardized coding in the 1990s. But it is also the geopolitical question as relations between the West and countries such as China and Russia decline.

“This (interoperability) is a topic that has been on the G20 agenda for a while … so I think there’s a good chance this could go on,” Carstens said, adding that there had been a number of “real “life” experiments with different CBDCs in the last year.

Asked how long before international standards for CBDC interoperability can be agreed, he said: “I think in the next couple of years. Probably 12 months is too short.”

Reporting by Marc Jones; Editing by Bernadette Baum

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