With help from Derek Robertson
It’s been a rough stretch for the world’s top central bankers, who are facing pressure to tame high prices without crashing their economies now that persistent inflation has defied their predictions“,”link”:{“target”:”NEW”,”attributes”:[],”url”:”https://www.reuters.com/business/feds-powell-ecbs-lagarde-markets-hold-your-rate-hike-horses-2021-11-04/”,”_id”:”00000182-37eb-d13b-a5c2-77eb3faa0001″,”_type”:”33ac701a-72c1-316a-a3a5-13918cf384df”},”_id”:”00000182-37eb-d13b-a5c2-77eb3faa0002″,”_type”:”02ec1f82-5e56-3b8c-af6e-6fc7c8772266″}”their predictions. It doesn’t help that they face this challenge amid an explosion of interest in cryptocurrencies, a technology invented to bypass their power entirely.
But the past few months have been even rougher for crypto. So as crypto markets melt down, central banks are not letting the moment go to waste.
Yesterday, when the Bank for International Settlements released its 115-page annual economic report“,”link”:{“target”:”NEW”,”attributes”:[],”url”:”https://www.bis.org/publ/arpdf/ar2022e.pdf”,”_id”:”00000182-37eb-d13b-a5c2-77eb3fab0000″,”_type”:”33ac701a-72c1-316a-a3a5-13918cf384df”},”_id”:”00000182-37eb-d13b-a5c2-77eb3fab0001″,”_type”:”02ec1f82-5e56-3b8c-af6e-6fc7c8772266″}”annual economic report, it devoted the final third to a detailed takedown of crypto and decentralized finance. The BIS is the most institutional of institutional players — an international organization that acts as a bank for central banks and is also owned by central banks.
The report seizes on the implosion last month of the algorithmic stablecoin Terra, arguing that the fiasco points to fundamental flaws that preclude the success of any monetary system that is not backstopped by central banks.
In short, the report contends that crypto is “unsuitable as the basis for a monetary system,” citing issues like scalability and trust. “A system grounded in central bank money,” it concludes, “offers a sounder basis for innovation.”
In recent years, papers published under the Bank’s aegis have gone from dismissive to defensive in their treatment of crypto. “Cryptocurrencies have failed,” declared a January 2020 report“,”link”:{“target”:”NEW”,”attributes”:[],”url”:”https://www.bis.org/publ/bppdf/bispap107.pdf”,”_id”:”00000182-37eb-d13b-a5c2-77eb3fab0002″,”_type”:”33ac701a-72c1-316a-a3a5-13918cf384df”},”_id”:”00000182-37eb-d13b-a5c2-77eb3fab0003″,”_type”:”02ec1f82-5e56-3b8c-af6e-6fc7c8772266″}”January 2020 report that surveyed central banks around the world. But late that year, crypto markets took off, and more recently, a couple of small countries have undertaken experiments in national adoption of Bitcoin as an alternative to sovereign currencies.
By this April, a…
Read More: Bankers revel in crypto’s crash- POLITICO
