The Bank for International Settlements (BIS) General Manager Agustin Carstens once again directed sharp criticism at Bitcoin during a speech at the Hoover Institute on January 27, 2021. He described the cryptocurrency as an asset with "inherent risk" that is becoming "increasingly vulnerable" to a 51% attack as it approaches its maximum supply of 21 million coins.
As a long-time Bitcoin skeptic, Carstens emphasized that only central banks should be responsible for issuing digital currencies. "Investors must be cognizant that Bitcoin may well break down altogether," he stated. "Scarcity and cryptography alone do not suffice to guarantee exchange." He argued that as block rewards decrease, miners will receive fewer incentives for processing transactions, leading to longer confirmation times and a weaker network security posture, thereby making majority attacks more feasible.
Bitcoin Dismissed as 'a Community of Online Gamers'
Carstens characterized Bitcoin as a "speculative asset" lacking "actual value backing" and suggested it should be viewed as "a community of online gamers." He also cited Bitcoin mining's electricity consumption exceeding that of entire Switzerland and alleged price manipulation as additional reasons for what he called the asset's impending collapse. "Bitcoin poses as its own unit of account, but 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 remarked.
Broadside Against Stablecoins and Private Money
The BIS chief also targeted stablecoins, particularly the project originally known as Libra and later rebranded to Diem, backed by Facebook. He found fault with private entities running a public monetary system by issuing coins backed by other assets such as fiat currencies. "Private stablecoins cannot serve as the basis for a sound monetary system. They need to be heavily regulated and supervised," Carstens thundered. In his view, governments should forever remain in control of issuing money. "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," he explained. The remarks reignited debate within the crypto community around central bank digital currencies versus decentralized money.