“Crypto Has Lost The Battle Against Fiat Currencies”

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Bank of International Settlements (BIS) head Agustin Carstens has said that cryptocurrencies have lost the “battle” against fiat currencies like the euro, pound, and yen issued by the various central banks across the world.

The comments came during a Wednesday event at the Monetary Authority of Singapore, where the BIS executive insisted that stablecoins are not dependable as they lack the institutional structures and social conventions behind them.

In an interview with Bloomberg after the event, Agustin Carstens, the general manager of the BIS, noted “the battle between fiat and crypto assets has been won,” insisting that technology alone does not qualify as “trusted money,” adding:

Only the legal, historical infrastructure behind central banks can give great credibility to money.

Stablecoins Unable To Guarantee The Singleness Of Money

Further, in his speech, the BIS executive made similar comments about stablecoins, saying there will always be “alternative visions of what a future monetary system and digital money could look like,” adding that some crypto supporters believe stablecoins will be the future of money.

However, Carstens is not for that opinion at all, as he thinks these crypto proponents forget what actually sustains fiat currencies. On this note, he says:

What this view forgets is that what sustains fiat money is not the application of novel technologies but all the institutional arrangements and social conventions behind it.

According to Carstens, these arrangements and conventions are precisely what make money reliable for the public.

Detailing how the events of the past year have raised serious concerns on whether stablecoins can operate as money, Carstens highlighted that stablecoins depend on the credibility of fiat with fewer regulatory defenses. This, according to him, means they cannot guarantee the unity of money.

[Stablecoins] do not settle in central bank money or enjoy lender-of-last-resort support.

Accordingly, Carstens said that stablecoins could not ensure the singleness of money, expressing his belief that central bank digital currencies (CBDCs), on the other hand, could provide safe and stable money.

The BIS general manager ended his speech by noting that it was important for present-day financial incumbents to contribute to innovation of this kind, with a particular focus on central banks. In his opinion, if central banks fail to innovate, others will come into the scene and take over that role.

Nevertheless, Carstens warned that in the meantime, we must ensure that stablecoins are not harmful to investors and consumers. He also called for precautionary measures to ensure that stablecoins do not contribute to a fragmented monetary system that subverts the singleness of money.

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