Agustin Carstens, General Manager of the Bank for International Settlements (BIS), has renewed his criticism of bitcoin, warning that the cryptocurrency is “inherently risky” and becoming “increasingly vulnerable” to a 51% attack as its supply approaches the 21 million cap. In a speech delivered at the Hoover Institution on January 27, 2021, Carstens argued that only central banks should issue digital currencies, dismissing both bitcoin and private stablecoins as unfit for a sound monetary system.
Bitcoin’s Vulnerability to Majority Attack
Carstens highlighted that as bitcoin miners receive fewer block rewards, the incentive to secure the network weakens, leading to longer confirmation times and heightened vulnerability to majority attacks—where a single entity gains control of over 50% of the network’s hashing power. “Investors must be cognizant that bitcoin may well break down altogether,” he warned. “Scarcity and cryptography alone do not suffice to guarantee exchange.”
Speculative Nature and Environmental Concerns
The BIS chief dismissed bitcoin as “a speculative asset” lacking “actual value backing,” comparing its community to “online gamers.” He also criticized the energy consumption of bitcoin mining, which he claimed uses “more electricity than all of Switzerland,” and alleged price manipulation in the market. “Fluctuations in value mean it is unrealistic to set prices in bitcoin. This also undermines its usefulness as a means of exchange, and makes it a poor store of value,” Carstens added.
Stablecoins and the Role of Central Banks
Carstens also targeted private stablecoins, such as Facebook’s Diem (formerly Libra), arguing that private entities cannot be trusted to operate public monetary systems. “Private stablecoins cannot serve as the basis for a sound monetary system. They need to be heavily regulated and supervised,” he stated. In his view, governments must retain control over money issuance. “Clearly, if digital money is to exist, the central bank must play a pivotal role, guaranteeing the stability of value, ensuring the elasticity of the aggregate supply of such money, and overseeing the overall security of the system.”
Carstens’ remarks continue to fuel debate over bitcoin’s long-term security and the future of central bank digital currencies (CBDCs). While bitcoin proponents dispute his assertions, the BIS’s influence on global financial policy ensures his warnings carry weight among regulators and central bankers worldwide.