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The Bank of International Settlements (BIS), a transnational institution owned by and comprised of central banks that seeks to “fosters international monetary and financial cooperation and serves as a bank for central banks,” recently published its quarterly review of “International banking and financial market developments” for June 2018. The report includes an op-ed written by BIS general manager Agustín Carstens that describes many cryptocurrencies as comprising “get-rich-quick schemes” that “should not be conflated with the sovereign currencies and established payment systems that have stood the test of time.”
BIS General Manager Critical of New Cryptocurrencies
Mr. Carstens’ article opens with a recognition that popular confidence in legacy financial institutions has been undermined by contemporary innovations in communications and technology, such as cryptocurrency, stating that “preserv[ing] trust in financial transactions is a tricky business in our digital age.”
The BIS general manager asserts that “With new cryptocurrencies proliferating, it’s as important to educate the public about good money as it is to build defences against fake news, online identity theft, and Twitter bots.”
“Conjuring up new cryptocurrencies is the latest chapter in a long story of attempts to invent new money, as fortune seekers have tried to make a quick buck,” Mr. Carstens continued. “It has become the alchemy of the age of innovation, with the promise of magically transforming everyday substances (electricity, in this case) into gold (or at least euros).”
“Private Cryptocurrencies Struggle to Earn Public Trust”
Mr. Carstens argues that “What makes currencies credible is trust in the issuing institution, and successful central banks have a proven record of earning this public trust.”
By contrast, the BIS general manager claims that “Many cryptocurrencies are ultimately get-rich schemes” that “should not be conflated with the sovereign currencies and established payment systems that have stood the test of time.”
“The short experience of cryptocurrencies shows that technology, however sophisticated, is a poor substitute for hard-earned trust in sound institutions.”
Central Banks Explore Blockchain Technology
Mr. Carstens states that “Currently, central banks around the world are working on systems for retail payments that will allow instant transfers, anytime and anywhere. They are also actively testing the distributed ledger technology underlying cryptocurrencies – not as a substitute for the current system, but to build on it.”
The BIS general manager concludes that “Even in this digital age, trust in the issuing institution matters and will continue to underpin currencies. Central banks, for their part, will have to continue earning that public trust by closely guarding their currency’s value.”
Mr. Carstens added that the BIS would be providing further elaboration regarding its opinions pertaining to cryptocurrency in a “special section” of its annual report on June 17th.
Do you think that cryptocurrency undermines the financial hegemony of central banks? Share your thoughts in the comments section below!
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The post BIS GM Argues New Cryptos Are “the Alchemy of the Age of Innovation” appeared first on Bitcoin News.
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Steve Eisman, the American investor best known for having shorted collateralized debt obligations before the 2008 financial crisis, doesn’t see what is the real value of cryptocurrency. He reportedly holds that the popularity of the phenomena comes down to only two factors, speculation and money laundering.
Steve Eisman Doesn’t Get Crypto
Speaking in front of about 1,500 people at the CFA Institute’s annual conference in Hong Kong on Monday, Eisman even questioned the rationale for cryptocurrencies to exist. “I don’t see the purpose of it. What value does cryptocurrency actually add? No one’s been able to answer that question for me.”
In a panel discussion and a following interview, Eisman revealed that he has never invested in nor shorted any cryptocurrencies. “I don’t touch it. I don’t know what I’m looking at…I have no interest,” he explained. “I don’t understand why regulators haven’t regulated it more heavily,” Eisman added according to the Wall Street Journal.
Eisman was a lead character in Michael Lewis’ bestselling 2010 book about the build-up to the US housing bubble “The Big Short: Inside the Doomsday Machine.” He was played by comedian Steve Carell in the 2015 movie adaptation which showed how he made millions correcting betting against CDOs when everyone else was blinded by greed. In the case of cryptocurrency however he seems to go with the flow, joining the likes of Warren Buffett and Charlie Munger who bash what they insist not to understand.
The Value of Bitcoin
Unlike Eisman, the author of the book who made him famous does seem to think he knows the value cryptocurrency adds. Back in November 2017 we reported that Lewis commented, “Bitcoin is money without a central authority, and money without a central bank or government, [without] needing a government. So what drives its value? The distrust of central authority and the feeling that maybe the governments aren’t going to work. There’s definitely a link between whatever bitcoin is doing and the chaos in the federal, in the US federal government,” he explained.
Besides The Big Short, Lewis is author of Liar’s Poker, Moneyball, Flash Boys and other best sellers. Maybe Eisman should just call his old acquaintance to get a private lecture on the subject of cryptocurrency.
How would you explain the value of bitcoin to Steve Eisman? Share your thoughts in the comments section below.
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The post Steve Eisman of ‘The Big Short’ Fame: What Value Does Cryptocurrency Actually Add? appeared first on Bitcoin News.
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