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Bank For International Settlements Warns: ‘Dangers Of Crypto Are Materializing’
Using the recent carnage that the entire cryptocurrency market went through as an argument, the Bank for International Settlements (BIS) once again reiterated its skeptical attitude towards the new asset class.
Himanshu S.
7:33 21st Jun, 2022
Policy

Specifically, in its upcoming annual report, the global central bank body warned that the recent crypto crash indicated the current materialization of the predictions about the dangers of decentralized finance (DeFi).

According to the BIS general manager Agustin Carstens, the recent crashes of the TerraUSD (UST) stablecoin and a 70% drop in Bitcoin (BTC) price were the indicators that there was a structural problem within the crypto market.

Moreover, Carstens believes that no form of money can have credibility unless it is controlled by a government-backed authority “that can use reserves funded by taxes.” As he explained:

“I think all these weaknesses that were pointed out before have pretty much materialized. You just cannot defy gravity… At some point, you really have to face the music.”

BIS: ‘Won’t lead to a global crisis, but still bad’

Furthermore, the BIS chief also said the crypto crash was not expected to lead to a systemic crisis in the same way that bad loans triggered the global financial collapse. However, he did highlight that it would lead to substantial losses.

Additionally, he underlined the non-transparent character of the crypto market, which according to him, exacerbated uncertainty, stating that:

“Based on what we know, it should be quite manageable. But, there are a lot of things that we don’t know.”

In its report, the BIS also called for more attention toward creating suitable central bank digital currencies (CBDCs), the implementation of which some countries have been testing, including China, whose residents have been receiving digital yuan from the government as part of those tests.

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