Last week, Agustin Carstens, the head of the Bank of International Settlements (BIS), widely considered the central bank of central banks – told cryptocurrency makers to “stop trying to create money.”
And the crypto community promptly had a field day with those remarks.
The BIS head has, to date, adopted a largely hostile tone toward cryptocurrencies. Back in February, he called bitcoin “a combination of a bubble, a Ponzi scheme and an environmental disaster” during a lecture.
Carstens isn’t alone in his view, to be sure. Billionaire Warren Buffett, for example, said earlier this year that bitcoin is “rat poisoned squared,” while JPMorgan Chase CEO Jamie Dimon famously declared in 2017 that bitcoin is “a fraud” (though he later said he regretted issuing those remarks).
And while Carstens has long held this position, it was his remarks last week – essentially calling for a moratorium on te creation of new cryptos – that drew the ire of many in the community on social media. He also argued that “it’s a fallacy to think money can be created from nothing” – a contention that drew more than a few derisive comments.
It was developer Jameson Lopp who perhaps best summed up that collective sentiment:
Indeed, many drew issue with the fact that an institution tied to central banks – which manage the money systems of economies and serve as lenders of that money – would call out anyone over the creation of money from nothing.
The trust issue
It’s worth noting that, at the time of the bitcoin network’s official launch in January 2009, the world’s financial sector was, to quote Satoshi Nakamoto, “on the brink of collapse.” That line – “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” – was immortalized in bitcoin’s genesis block.
As Coinbase chief technology officer Balaji Srinivasan quipped, bitcoin’s creation was steeped in the context of mistrust in banks.
Commentator Matt Odell argued that Carstens got at least one thing “almost right”: that trust is a valuable thing.
But in this case, however, it’s not central banks that are earning the trust of everyday folk.
While Carstens never came out and declared that cryptocurrencies pose a competitive threat to central bank-backed monies, his organization has touched on the subject in the past.
Last month, the BIS published a report that examined them, concluding that “the decentralized technology of cryptocurrencies, however sophisticated, is a poor substitute for the solid institutional backing of money.”
Harsh stance aside, the BIS noted that “the underlying technology may have promise in other fields” – something other central banks have highlighted before.
Whether Carstens intended to or not, his comments came across as a bit of a competitive challenge to some in the crypto space.
Indeed, Carstens’ contention was ultimately positioned as an argument for fiat currencies in favor of cryptocurrencies.
And – perhaps unsurprising – some observers saw Carstens’ commentary as a sign that they should, in fact, buy more cryptocurrency.
Ultimately, Carstens’ call to stop creating new kinds of money may have actually inspired people to do the opposite.