And the crypto community promptly had a field day with those remarks.

The BIS head has, to date, adopted a largely hostile tone toward cryptocurrencies. Back in February, he called bitcoin “a combination of a bubble, a Ponzi scheme and an environmental disaster” during a lecture.

Carstens isn’t alone in his view, to make certain . Billionaire Warren Buffett, for instance , said earlier this year that bitcoin is “rat poisoned squared,” while JPMorgan Chase CEO Jamie Dimon famously declared in 2017 that bitcoin is “a fraud” (though he later said he regretted issuing those remarks).

And while Carstens has long held this position, it had been his remarks last week – essentially calling for a moratorium on te creation of latest cryptos – that drew the ire of the many within the community on social media. He also argued that “it’s a fallacy to think money are often created from nothing” – a contention that drew quite a couple of derisive comments.

It was developer Jameson Lopp who perhaps best summed up that collective sentiment:

Indeed, many drew issue with the very fact that an establishment tied to central banks – which manage the cash systems of economies and function lenders of that cash – would call out anyone over the creation of cash from nothing.

The trust issue
It’s worth noting that, at the time of the bitcoin network’s official launch in January 2009, the world’s financial sector was, to quote Satoshi Nakamoto, “on the brink of collapse.” That line – “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” – was immortalized in bitcoin’s genesis block.

As Coinbase chief technology officer Balaji Srinivasan quipped, bitcoin’s creation was steeped within the context of mistrust in banks.

Commentator Matt Odell argued that Carstens got a minimum of one thing “almost right”: that trust may be a valuable thing.

But during this case, however, it’s not central banks that are earning the trust of everyday folk.

Currency competition?
While Carstens never came out and declared that cryptocurrencies pose a competitive threat to central bank-backed monies, his organization has touched on the topic within the past.

Last month, the BIS published a report that examined them, concluding that “the decentralized technology of cryptocurrencies, however sophisticated, may be a poor substitute for the solid institutional backing of cash .”

Harsh stance aside, the BIS noted that “the underlying technology may have promise in other fields” – something other central banks have highlighted before.

Whether Carstens intended to or not, his comments found as a touch of a competitive challenge to some within the crypto space.

Indeed, Carstens’ contention was ultimately positioned as an argument for fiat currencies in favor of cryptocurrencies.

And – perhaps unsurprising – some observers saw Carstens’ commentary as a symbol that they ought to , in fact, buy more cryptocurrency.

Ultimately, Carstens’ call to prevent creating new sorts of money may have actually inspired people to try to to the other .

Carstens image via Shutterstock

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Story from Policy & regulation
Stablecoin Crisis Could Wreck Global Finance, Fed Warns in New Report
Nov 15, 2019 at 21:00 UTC
Updated Nov 15, 2019 at 22:45 UTC
Danny Nelson
The U.S. Federal Reserve System Board on Friday warned that a stablecoin crisis could wreak havoc on the worldwide economy and outlined the steps issuers must fancy protect the established order .

The central bank’s prognosis – buried deep within the November edition of its semiannual “Financial Stability Report” – rests on a stablecoin worst case outcome: a run on the issuers, during which coin holders panic en-masse and demand the return of the fiat they staked.

Stablecoins are a sort of cryptocurrency that maintain their value by staking themselves to fiat reserves. While the volatility of bitcoin, the foremost widely-owned cryptocurrency, may be a favorite point of its detractors, stablecoins are digital currencies backed 1:1 with a fiat asset or basket of currencies, and designed to take care of a gentle value.

The report’s concern is that something could fail with the way the stablecoin works – be it, with operations, liquidity, or credit. “This loss of confidence could lead on to a run,” it said.

“In an extreme scenario, holders could also be unable to [liquidate], with potentially severe consequences for domestic or international economic activity, asset prices, or financial stability.”

Since the fraught launch of the Libra stablecoin concept in June, the Fed Governors, along side U.S. regulators and counterparts abroad, are sounding alarm bells. Beyond the digital currency question, the mixing with mass consumer social network might be disastrous, the report warns.

“Stablecoin initiatives that are built on existing large and cross-border customer networks, like Facebook’s Libra, have the potential to rapidly achieve widespread adoption,” the report said, echoing comments made by Fed Governor Lael Brainard last month.

But now condensed into one document, the report consolidates and formalize regulators’ concerns and notes the steps required to stop a stablecoin catastrophe.

The Fed’s report said:

Issuers must disclose how their staking mechanism works
Issuers must protect customer data privacy while maintaining KYC records to stop illicit use
Issuers must disclose their terms of service
Issuers must inform customers if they need any rights to the underlying asset
“As the Group of Seven has noted, ‘no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks outlined [in this report] are adequately addressed, through appropriate designs and by adhering to regulation that’s clear and proportionate to the risks.’”