Regulators and central banks across the globe must protect consumers and ensure that cryptocurrencies will not be used to help people evade tax, finance illicit activities and launder money.
Bank for International Settlements (BIS) general manager Agustin Carstens stressed these points in a speech at Goethe University in Frankfurt, Germany.
According to Reuters, Carstens questioned the sustainability of cryptocurrencies, particularly bitcoin, which he called a “combination of a bubble, a Ponzi scheme and an environmental disaster”.
“The meteoric rise of cryptocurrencies should not make us forget the important role central banks play as stewards of public trust. Private digital tokens masquerading as currencies must not subvert this trust,” he said.
Carstens said the nature of bitcoin, which involves extreme price volatility, lack of protection, and high transaction costs, is something to be wary about.
Bitcoin grew in value by more than 1,000% last year. However, because of the threat of regulatory clampdown in different parts of the world, its value has suddenly dropped by 50%. China, South Korea, and India have already made efforts to ban parts of this growing virtual market.
“The volatility of bitcoin renders it a poor means of payment and a crazy way to store value,” Carstens said.
He suggested that only exchanges and products that meet accepted standards should be given access to banking and payment services.
“To ensure a level playing field for all participants in financial markets, access to legitimate banking and payment services should be limited to those exchanges and products that meet accepted high standards. This means ‘same risk, same regulation’. And no exceptions allowed,” Carstens said.