As Bitcoin plunged to the $6,000 valuation mark, some financial experts declared the cryptocurrency a brazen scam with the potential to destabilize global financial markets and currency transactional stability.
The digital asset has since recovered to above $8,000.
Nevertheless, Agustín Carstens, the new director of the Bank for International Settlements (B.I.S.) and former governor of the Central Bank of Mexico, calls Bitcoin “a bubble, a Ponzi scheme and an environmental disaster.”
Carstens has publicly stressed that the anonymous, untraceable act of blockchain mining for Bitcoins has the potential to erode public trust in central banking systems and government-backed currencies.
The B.I.S. warned that global central banking authorities need to better educate the public on differentiating between real money and cryptocurrencies.
A “parasitic” relationship between real-world currencies and cryptocurrencies could slowly lead to the destabilization of financial markets, Carstens warned.
“If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” the bank chief said.
Such stern statements from the head of an international bank suggest an imminent and strict regulatory hard line against cryptocurrencies on a global scale.
Warning signs
The Bank for International Settlements is a global central banking body that maintains monetary accounts for governments and global financial institutions.
The U.S. Federal Reserve and the Bank of England, for example, have accounts with the B.I.S.
Carstens said that Bitcoin’s popularity is predicated on uncontrollable “speculative mania,” instead of public trust in government backed and regulated currency minting.
Carstens warned of the ease with which cryptocurrencies can be used for illegal means.
“While perhaps intended as an alternative payment system with no government involvement, it has become a combination of a bubble, a Ponzi scheme and an environmental disaster. The volatility of Bitcoin renders it a poor means of payment and a crazy way to store value,” he said.
In no uncertain terms, Carstens said that all responsible financial regulating bodies should do their utmost to curtail cryptocurrency activities for the sake of public safety and international monetary system integrity.
“There is a strong case for policy intervention. Appropriate authorities have a duty to educate and protect investors and consumers, and need to be prepared to act,” he said.
Over $550 billion dollars of valuation have been erased from Bitcoin since the start of 2018.
