{"id":1227,"date":"2022-01-19T00:27:19","date_gmt":"2022-01-19T00:27:19","guid":{"rendered":"https:\/\/www.cryptoheretostay.com\/?p=1227"},"modified":"2022-01-19T00:27:20","modified_gmt":"2022-01-19T00:27:20","slug":"bis-chief-urges-trust-in-central-banks","status":"publish","type":"post","link":"https:\/\/cryptoheretostay.com\/?p=1227","title":{"rendered":"BIS Chief Urges Trust in Central Banks"},"content":{"rendered":"<p> <script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"crypto\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<\/p>\n<h3>Key Takeaways<\/h3>\n<p>The general manager of the Bank for International Settlements, Agust\u00edn Carstens, has said that the soul of money is trust.<br \/>\nAccording to him, this trust can never be outsourced and automated, and that central banks are in the best position to provide it.<br \/>\nHe said that stablecoins issued by big tech companies could disintermediate incumbent banks, pose risks to financial stability, and fragment national and global monetary systems.<\/p>\n<p>Share this article<\/p>\n<p>Agust\u00edn Carstens, the general manager of the Bank for International Settlements, has argued that cryptocurrencies and decentralized finance are inherently risky and that \u201cwhen a crash happens and money is lost\u201d users will inevitably \u201cturn to a trusted and experienced party\u2014the public authorities.\u201d\u00a0\u00a0\u00a0<\/p>\n<h2>BIS Chief: \u201cThe Soul of Money is Trust\u201d<\/h2>\n<p>According to the general manager of the Bank for International Settlements, Agust\u00edn Carstens, sound money should not be based on trustless, permissionless, and anonymous ledgers, but on trust, and more specifically\u2014trust in central banks. Speaking at a Goethe University\u2019s conference on \u201cData, Digitalization, the New Finance and Central Bank Digital Currencies: The Future of Banking and Money\u201d on Tuesday, he said:<\/p>\n<p>\u201cMy main message today is simple: the soul of money belongs neither to a big tech nor to an anonymous ledger. The soul of money is trust. And central banks have been and continue to be the institutions best placed to provide trust in the digital age.\u201d<\/p>\n<p>The statement from the head of the BIS goes against the what many believe are the central ideas for which the cryptocurrency movement stands. Decentralization, or the elimination of intermediaries, is one of the top value propositions of cryptocurrencies. They operate under the assumption of \u201cdon\u2019t trust, verify.\u201d The anonymous creator of Bitcoin, Satoshi Nakamoto, made this objective abundantly clear in the Bitcoin whitepaper: \u201cWe have proposed a system for electronic transactions without relying on trust,\u201d they wrote in the conclusion.<\/p>\n<p>The BIS is a supranational financial institution founded under an international treaty on May 17, 1930. It is often dubbed \u201cthe bank for central banks\u201d because it serves central banks in ways similar to those in which commercial banks would serve retail clients. It is a powerful institution that collects and processes data from over 63 central banks and exerts influence over the monetary policy of sovereign nations. It is governed by unelected officials and operates under legal immunity.<\/p>\n<p>Carstens said that in today\u2019s two-tiered monetary system, central banks provide an open, neutral, trusted, and stable platform. Private companies, he argued, use the ingenuity and dynamism of central banks to develop new financial products and payment methods. This was a powerful driver of innovation and welfare, he added, but some recent developments in the private sector could \u201cthreaten money\u2019s essence as a public good, if taken too far.\u201d<\/p>\n<p>More specifically, he pointed at digital innovations, such as stablecoins\u00a0issued by big tech companies, as well as the rise of decentralized finance. On the former, Carstens spoke about the dangers of big tech companies cornering the payments market and cited market concentration, privacy, and accessibility risks.<\/p>\n<p>He further stated that big tech companies have achieved systemic relevance in several economies and that this trend could accelerate if one of these companies created a dominant, closed ecosystem around their own global stablecoins. \u201cOnce established, a company is likely to erect barriers against new entrants, leading to market dominance, data concentration, and less competition,\u201d he said.<\/p>\n<p>According to Carstens, global stablecoins issued by big tech firms could disintermediate incumbent banks, pose risks to financial stability, and fragment national and global monetary systems. Stablecoin issuers also pose privacy risks, as they collect vast amounts of financial data on their users. Elaborating on this point, he said:<\/p>\n<p>\u201cMoreover, it is possible that the data holder ends up knowing more about users\u2019 behavior than the users do themselves. Armed with exclusive access to data, big techs can quickly scale up and dominate markets.\u201d<\/p>\n<p>The general manager of the \u201cbank for central banks\u201d seems to believe that only central banks should be trusted with the responsibility of collecting vast amounts of financial user data. According to a 2021 BIS\u00a0working paper\u00a0on big data and machine learning in central banking, central banks\u2019 interest in big data has increased considerably over the last few years. Currently, over 80% of central banks collect and use big data for research, supervision, and regulation, up from only 30% in 2015.<\/p>\n<p>On the topic of decentralized finance, Carstens pointed to a recent BIS research paper that argued that full decentralization in DeFi was an illusion. He conceded that decentralization can be a noble goal, but expressed doubts concerning DeFi\u2019s execution on this promise, claiming that \u201cthis principle [decentralization] is not what DeFi applications are delivering.\u201d\u00a0<\/p>\n<p>Carstens also argued that decentralization had certain costs and cited high transaction fees, or rents. \u201cThese rents [transaction fees] accumulate mostly to insiders, such as Bitcoin miners, or those who hold more governance tokens,\u201d he said, adding that many protocols entrench insiders since those with more coins have more power.<\/p>\n<p>According to the BIS chief, DeFi offered no efficiency gains for average users; it only meant higher costs for users and spectacular returns for insiders. It also suffered from the same vulnerabilities of traditional finance, including high leverage and liquidity mismatches. Carstens argued that people would eventually turn to trusted authorities to seek help due to these drawbacks and vulnerabilities. He said:<\/p>\n<p>\u201cWhen a crash happens and money is lost, users will inevitably turn to a trusted and experienced party\u2013the public authorities\u2013to tame the unleashed spirits and restore order.\u201d<\/p>\n<p>Finally, Carstens said sound money should not be based on anonymity but on identification and trust. And trust, according to Carstens, \u201ccan never be outsourced or automated.\u201d\u00a0<\/p>\n<p>In less than 14 years since Bitcoin was launched, cryptocurrencies\u2014which operate under the exact opposite assumption\u2014have reached a market capitalization of more than $2 trillion. Stablecoins, a much later invention, currently have a combined market capitalization of over $172 billion.<\/p>\n<p><em>Disclosure: At the time of writing, the author of this feature owned ETH and several other cryptocurrencies.<\/em><\/p>\n<p>Share this article<\/p>\n<p>The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.<\/p>\n<p>You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.<\/p>\n<p>See full terms and conditions.<\/p>\n<h3 class=\"title\">Full Decentralisation in DeFi is Illusory: BIS Report<\/h3>\n<p>\nIn its latest quarterly review, the Bank for International Settlements (BIS) has claimed that decentralization in decentralized finance (DeFi) is an illusion and argues that policymakers should leverage this to&#8230; <\/p>\n<h3 class=\"title\">BIS Says Stablecoins Need Traditional Payments Rules<\/h3>\n<p>\nA new report from the Bank for International Settlements suggests that stablecoins should be subject to the same rules as traditional payment systems. IOSCO-BIS Prescribe Stablecoin Rules A new report&#8230; <\/p>\n<h3 class=\"title\">BIS, IMF, World Bank Planning for Interoperable CBDCs<\/h3>\n<p>\nA joint committee of the BIS Innovation Hub, the International Monetary Fund (IMF), and the World Bank has proposed keeping interoperability in mind while designing central bank digital currencies (CBDCs)&#8230; <\/p>\n<h3 class=\"title\">Is Time on our Side? The Case for Bitcoin\u2019s Lengthening Cycles<\/h3>\n<p>\nOne of the many unique features of BTC is its halving process, which is often accompanied by a bullish movement and preceded by bearish consolidation. Bitcoin\u2019s halving events have been&#8230; <\/p>\n<h3 class=\"title\">Stablecoins, DeFi \u201cWill Challenge\u201d Traditional Banks: BIS<\/h3>\n<p>\nThe head of the Bank for International Settlements\u2019 innovation hub has stated that \u201cglobal stablecoins, DeFi platforms, and big tech firms will challenge banks\u2019 models\u201d in a speech delivered at&#8230; <\/p>\n<p><script type=\"text\/javascript\">\r\namzn_assoc_placement = \"adunit0\";\r\namzn_assoc_tracking_id = \"totafreearti-20\";\r\namzn_assoc_ad_mode = \"search\";\r\namzn_assoc_ad_type = \"smart\";\r\namzn_assoc_marketplace = \"amazon\";\r\namzn_assoc_region = \"US\";\r\namzn_assoc_default_search_phrase = \"bitcoin\";\r\namzn_assoc_default_category = \"All\";\r\namzn_assoc_search_bar = \"false\";\r\namzn_assoc_title = \"\";\r\namzn_assoc_rows =\"1\";\r\n<\/script>\r\n<script src=\"\/\/z-na.amazon-adsystem.com\/widgets\/onejs?MarketPlace=US\"><\/script><br \/>\n<br \/><a href=\"https:\/\/cryptobriefing.com\/bis-chief-urges-trust-in-central-banks\/?utm_source=main_feed&#038;utm_medium=rss\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Key Takeaways The general manager of the Bank for International Settlements, Agust\u00edn Carstens, has said that the soul of money is trust. According to him, this trust can never be outsourced and automated, and that central banks are in the best position to provide it. He said that stablecoins issued by big tech companies could [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":1228,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_wp_rev_ctl_limit":""},"categories":[4],"tags":[],"class_list":["post-1227","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-news"],"_links":{"self":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1227","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1227"}],"version-history":[{"count":1,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1227\/revisions"}],"predecessor-version":[{"id":1229,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/posts\/1227\/revisions\/1229"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=\/wp\/v2\/media\/1228"}],"wp:attachment":[{"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1227"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1227"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cryptoheretostay.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1227"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}