The general manager of the Bank for International Settlement, Agustin Carstens, said events in the past year “have cast serious doubts on the ability of stablecoins to function as money.”
In a Feb. 22 speech, the bank chief argued that what sustains fiat currency is not novel technologies but “the institutional arrangements and social conventions behind it.”
According to Carstens, stablecoins do not enjoy the credibility of sovereign fiat currencies, and the lack of regulatory clarity impacts them. Carstens said:
“[Stablecoins] do not benefit from the regulatory requirements and protections applying to bank deposits. They do not settle in central bank money, or enjoy lender-of-last-resort support. Accordingly, they cannot guarantee the singleness of money.”
In a separate Bloomberg interview, the bank chief said he anticipates strengthened regulation of the digital-asset sector from the G20.
Over the past year, the failure of Terra’s algorithmic stablecoin and the subsequent capitulation of FTX has heightened regulatory scrutiny around the crypto industry. Regulators worldwide have introduced various measures to stave off the impact of such future fall-outs from the broader financial sector.
Carsents support CBDC and tokenized deposits
Meanwhile, Carstens believes tokenized deposits and central bank digital currencies (CBDCs) can make the financial industry more efficient.
“CBDCs replicate existing forms of money in a technologically superior way.”
Carstens added that CBDCs will play central bank money’s role in today’s system, while tokenized deposits can be commercial bank money.
“Tokenised deposits and CBDCs could also open the door for more efficient payment arrangements in business settings or for larger purchases.”
The BIS chief also noted that the technology underpinning crypto could still be applied to the financial sector for the best results.
“It is incumbent upon central banks to make sure they contribute to developing an infrastructure that meets these demands: if central banks do not innovate, others will step in,” he added.
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