This Interview appeared today in the German Newspaper "Der Spiegel"
It is an "automated" translation. I found it interesting just to see the arguments of a "Central Banker"
For me it would be interesting to have a view of this arguments from the community here
About the person
Agustín Carstens is a central banker through and through. From 1980, he worked for the Banco de México, and in 1999 he joined the International Monetary Fund. He later became Mexico's finance minister, then head of his home country's central bank. Since 2017, Carstens has led the Bank for International Settlements (BIS) in Basel. The world's oldest international financial organization manages the foreign reserves of national central banks and plays a central role in monetary and financial policy events.
Agustín Carstens (63) is driven by the Bitcoin phenomenon. The Mexican is head of the Bank for International Settlements (BIS) in Basel, a kind of super central bank. In an interview with SPIEGEL, Carstens makes clear how little he thinks of most cryptocurrencies - and why he nevertheless sees good opportunities for Facebook's Diem money, of all things.
Interview:
SPIEGEL: Mr. Carstens, the bitcoin price has risen dramatically since the beginning of the year, but in recent weeks it has plummeted almost as much. Is a bubble bursting, as critics of cryptocurrencies believe?
Carstens: In many cases, it is enormously difficult to judge what is still normal and what is a bubble. But in this case it's simple: this is a bubble.
SPIEGEL: Why are you so sure?
Carstens: The price has risen steeply in a short time, but there was never any reason that could have explained the increase. So it's hard to believe that it's not a bubble.
SPIEGEL: Is the financial system in danger?
Carstens: No, I don't think so. Bitcoin is a speculative asset, but on the other hand it is not so widespread that it endangers the system. That applies to cryptocurrencies in general. They are bought by individual investors, but not to any significant extent by banks. However, bitcoin is an environmental disaster. And the market is easy to manipulate - Bitcoin and other cryptocurrencies are vulnerable to fraud.
SPIEGEL: Explain that, please.
Carstens: These so-called coins are misleadingly called currencies, but they have no fundamental value. The current price depends heavily on who entered the market last. Individual investors can drive the price up first and then let it fall to make a profit. This "pump and dump" phenomenon is typical for niche markets.
SPIEGEL: Tesla CEO Elon Musk is such an individual investor who, thanks to Twitter, has proven that he has enough power to influence the bitcoin price enormously, in both directions. Does that mean Musk is a threat to the financial market?
Carstens: That's a question that the relevant authorities need to clarify.
SPIEGEL: Is the current regulation sufficient?
Carstens: We need to improve regulation. After all, the special thing about cryptocurrencies is that they have no nationality, but are at home in cyberspace, in other words, in a parallel world. Above all, we need to regulate the platforms on which cryptocurrencies are traded. And we need to make it clear, including in interviews like this one, that this is a very risky market.
"It has been shown, after all, that bitcoins have no practical use."
SPIEGEL: Cryptocurrencies are becoming more and more popular. Could you eventually become a real threat to money issued by states - so-called fiat currencies - or even replace them?
Carstens: I am much more confident today than I was a few years ago that this will not happen. After all, it has been shown that Bitcoins have no practical use. Look at the example of Tesla: The company just decided to stop accepting Bitcoins when someone wants to buy one of your cars.
SPIEGEL: American chains like Starbucks and Home Depot do accept cryptocurrencies.
Carstens: Bitcoin is only good for two things - speculation and ransom payments. Cryptocurrencies are not a good store of value because they are so volatile; they are not a medium of exchange because they are hardly accepted; and they are not a threat to real currencies because they do not have the same purpose as real currencies.
SPIEGEL: But if corporations like Facebook create their own digital currencies, they could become popular very quickly.
Carstens: Facebook's Diem, initially known as Libra, is based on exciting technology and backed by the dollar. That's an important distinction from bitcoin. Facebook is not creating a new currency with it, but what are known as stable coins. And Facebook is discussing the concept with the authorities, which is something completely different.
SPIEGEL: But is the Diem possibly a Trojan horse if enough users join in and Facebook ends its peg to the dollar?
Carstens: I don't see that danger; moreover, appropriate regulatory precautions could be taken. But the Diem shows us: The next step should be for central banks to develop their own digital currencies.
SPIEGEL: Who needs something like that? People have cash, debit and credit cards, PayPal and other payment options.
Carstens: At first glance, there is no pressing need for central banks to introduce digital currencies. Cash is indeed one of mankind's best inventions. But as society becomes more digital and payment systems evolve, there should be a digital complement to cash. We need to transfer the trust people have in traditional money to the digital world. That's not easy. We have to do it well and seriously.
SPIEGEL: Could cryptocurrencies, if they become more dominant, undermine central banks' monetary policies?
Carstens: No, cryptocurrencies do not play a relevant role in the financial system today or in the foreseeable future. Therefore, they will not influence the monetary policy of central banks.
SPIEGEL: Do digital central bank currencies pose a threat to private banks? People could withdraw their savings at the push of a button and move them to the central bank in a crisis.
Carstens: No, after all, to prevent a run on bank accounts, there are a variety of regulations, monitoring by supervisory authorities, as well as state deposit insurance systems. Apart from that, central banks certainly have no interest in copying private banks and their services. A digital central bank currency accessible to the general public would, of course, also require very intensive interaction with the general public. Central banks don't have the capacity for that. For that, you will have to rely on commercial banks - just like in the current system.
SPIEGEL: Could digital central bank money make it easier for people who don't have a traditional bank account to access digital cash?
Carstens: Yes, that is an important aspect. People of all ages and social backgrounds can do something with cash. That's why we need to copy the advantages of cash for the digital era. We want every member of society to be able to use digital central bank money.
SPIEGEL: Bitcoin fans argue that a decentralized monetary system is needed to prevent monetary policy from being politically abused and interest rates and exchange rates from being manipulated, for example. What is your position on this?
Carstens: That's nonsense. Central banks have become much more transparent in recent years and decades, explaining their decisions and also regularly reporting to parliaments. Our priority is to control inflation, promote growth and thus also ensure employment. I believe that citizens understand that.
SPIEGEL: Do central banks need to hurry up and offer digital money?
Carstens: There is no advantage to being the first central bank to offer digital money. Rather, it is crucial that we do not allow ourselves to make any mistakes, that we protect this digital central bank currency against hacking attacks and that we preserve data protection. The technical challenge is great.
3/3
SPIEGEL: What might the financial system with digital central bank money look like in a few years?
"We don't want to abolish cash."
Carstens: We will have more efficient payment transactions, more people will benefit from financial innovations. Money transfers - even to far-flung corners of the world - will become much cheaper. We don't want to abolish cash. Our promise is that we will create a technologically advanced form of money that offers the same benefits and more.
SPIEGEL: Will there be corporate digital currencies alongside it, or decentralized cryptocurrencies like bitcoin?
Carstens: That's possible if they are strictly regulated. I see a future for stable coins if they are really stable, traded on platforms where there is fair competition, and if they protect consumers' data.
SPIEGEL: There are currently a lot of cryptocurrencies in circulation. Will they disappear as quickly as they emerged?
Carstens: It's nothing new in the history of money that currencies come into being and disappear again. Come to my home country, Mexico, and visit the money museum there. There you can see how many currencies there have been in our country. In the end, means of payment that are backed by a stable and independent central bank prevail. It may be that other currencies can exist as speculative investments, but not as money with all its functions.
SPIEGEL: So in the end, it's about what kind of money people trust?
Carstens: Yes, I think that's the central question.
Translated with www.DeepL.com/Translator (free version)
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