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‘Bitcoin ‘might break down altogether,’ BIS head Carstens warns

Bitcoin surged 300% in 2020.
Agustin Carstens, governor of Banco de Mexico (Banxico). Image: Bloomberg

Bitcoin is inherently risky and only central banks should issue digital currencies, according to the Bank for International Settlements.

“Investors must be cognisant that Bitcoin may well break down altogether,” because the system becomes vulnerable to majority attacks as it gets close to its maximum supply of 21 million coins, BIS General Manager Agustin Carstens said in a speech for the Hoover Institution on Wednesday.

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Carstens, who runs the Basel-based central bank for central banks, has often been critical of Bitcoin, which surged 300% in 2020.

The trouble with stablecoins, such as the one initially proposed by Facebook and backed by traditional currencies, is that a private entity is responsible for maintaining the asset backing, raising governance issues, he said.

Central banks around the world are, however, testing the use of digital currencies, spurred by advances in technology and the shift to electronic payments that’s been accelerated by the pandemic. The BIS has set up research hubs to look into the matter.

“Sound money is central to our market economy, and it is central banks that are uniquely placed to provide this,” Carstens said. “If digital currencies are needed, central banks should be the ones to issue them.”

© 2021 Bloomberg

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Bitcoin may break down yes, but in terms of what? In terms of the dollar? Well, the dollar has broken down already. The dollar has lost 98% of its purchasing power since 1970. Bitcoin will have to break down quite heavily to break down in terms of the fiat currency.

Cryptocurrencies are competition for Central Banks. Central Banks have a monopoly on the issuance of currency, they cannot allow competition. That is why the BIS will criticize cryptocurrencies and why all financial regulators will regulate and tax bitcoin transactions. They will protect their monopoly at all cost.

As long as we have governments is it not inevitable that they’ll want to regulate something that is currently beyond their control? That’s why I don’t see a good end to non-central bank regulated crypto

Maybe when central banks start issuing digital currency, that that’s when a broader audience will adopt and start using crypto with a little more faith.

“Want to regulate” is not the same as “able to regulate”.

Trying to regulating a decentralised entity is like trying to strangle a spectre, good luck to them!

Remember how they stopped thepiratebay from operating? Oh wait, they still haven’t won that battle.
How about the “War on drugs”? Oh wait, they lost that one and became a part of it, turning it into a government agency funding mechanism.

In the end everyone will adopt whether there is regulation or not, greed will see to that. Institutions follow retail. Banking follows institutions. Central banks and governments follow retail and commercial banking. Anyone who fails to follow will be left out and fall behind. Simple.

Hi Sensei. As you know I value your comments and opinions. I learnt thru the decades of running my own business to trust my gut instincts, which screams NO every time I consider investing some of my hard earned money in Bitcoin. On the other hand, being over 70 now, I remember how anything new was initially ridiculed by ‘older people’ where their conservatism has become a stumbling block. E.g Toyota was “Jap Crap”, Radial tyres “would never last” etc etc. Do you or would you park some cash in Bitcoin?

Foshan, I salute you.

All the reasons that motivate me to invest in Bitcoin, also motivate me, as a happily married man, to get a girlfriend. It is something new, exciting, secretive, trendy and it does offer some advantages. At my age, and with my level of life experience, I have learned my lessons, and I have come to the realisation that all those advantages come at a price. That price is equal to, or greater than the advantages, removing, or negating all the incentives.

I’d rather remain true to my initial commitment, the proven strategy that the young people describe as boring. They confuse boredom with comfort, security and peace. At my age, I know the difference.

I am not against cryptocurrencies in the same way I do not reject, or judge people who seek excitement in their lives. I just feel it is not worth it.

The short answer is – bitcoin is merely an alternative to gold and gold is a proven unit of account, store of value and means of exchange.

I hope that answers your question.

Yes, government is in reality just criminals in power.

And your summation is correct – as the old maxim goes : ‘Don’t steal, government hates competition’

Those in power will always try confiscate what is possible as greed and authority are bed fellows indeed, and this applied even to the USA government and gold sometime in the 1930’s, which few people even realize.

However, this is what makes BTC even more attractive than gold.

That is because, no one can ‘confiscate’ BTC – it is not a ‘physical’ commodity, and is not bound by ‘physical’ laws.

And yes, they may try ban it, just like they did with cocaine.

But that made cocaine one of the most expensive commodities in the world.

So good luck with them trying to outlaw BTC in that case.

It’s too late, and for the sake of brevity here, in a nutshell, impossible to do.

@Sensei

Usually you on the mark, but this time you totally off.

Comparing BTC to gold is like comparing the internet to the postal service.

Fact:

* I can send R10m of BTC right now to anyone in the world, and they will receive it in their wallet in the time that it takes me to fry a few eggs.

And about the same cost too.

No permission required, no stack of forms to fill in, no DNA sample required.

Send and receive to and from whoever I want because It’s MY funds, I am the SOVEREIGN owner of these funds – not corrupt politicians, NOT greedy bankers, not insatiable tax thieves.

Period.

Along with cash, BTC represents the ultimate asset swapping transaction between two parties in its purest form as it was intended when man first started trading.

On this basis alone, BTC won my heart [ yeah, and for the few that will squeal that it’s used by shady teenagers and dealers to transact on the oh so scary ‘dark net’ blah blah…wake up – the most dodgy people on earth, ie governments, bankers, big business, politicians and all the usual criminals have been using fiat to launder gazillions over the decades…..nobody complained then ??? ]

Boom.

* NOBODY can touch my BTC….not my mother-in-law, not SARS, not corrupt governments.

No one but no one can suddenly freeze my funds either.

All I have to do is apply basic responsibility toward my password [ private key ], just like anything in life worth keeping.

* Yes, gold is great, it’s not an ‘either/or’ situation.

You all missing the point…the tired old argument “GLD better than Crypto” blah blah

Ok, well then, have BOTH if you REALLY must have some GLD.

And have some spare hard cash buried along with your gold.

Both gold and cash might prove necessary in the future if shtf.

But I can assure you this, I can travel with MILLIONs of BTC on a usb stick anywhere in the world right now…..

Good luck trying walking through an airport with millions worth of gold or cash.

Greedy old parasitic Uncle Sam will def want a piece of that action !

And………. the efficiency and speed and ease of paying someone in BTC makes cash and gold very restricted geographically too !

* Unlike fiat toilet paper currency, BTC cannot be deflated.

21 million BTC.

Period.

And some 8 Billion ppl in the world

Do the math [ anyone remember ‘supply and demand’ ??… ]

All riding on the back of probably the most technically superior technology to date – block chain !

The reality is, I haven’t even touched the surface here regarding all the advantages of BTC.

Why on earth do you think its trading at half a million ZAR for one BTC ?…….now proven itself after more than a decade of battering, media bashing, bankers decrying it, governments moaning about it and trying to ‘control’ it with their grubby little fingers etc etc, since its inception in 2009.

Wakey wakey ppl.

And who knows just how big it will become once the masses cotton on.

But one thing I can assure, there are a lot of ignorant stubborn people regarding BTC, especially embarrassing when considering the average age and supposed financial literacy here !

@ Realitybites

Interesting but discounting 1 crucial fact: Governments and central banks want total control, so at the stroke of a pen they can shut down any or all private cryptos and remember, they have the army, the police and the jails to enforce it. Authoritarianism is their favourite game. Throughout history governments resorted to nefarious means to debase their coinage or simply confiscate it just as the USA did in the 1930s, the U.S. Government had resorted to massive spending (borrowing) to keep America’s economy from collapsing.

It’s understandable then that many investors who’ve diversified their portfolios with gold bullion are concerned that the government could resort to Great Depression-era tactics to bail itself out again. The President rewrote the laws and confiscated Americans’ gold bullion in 1933.

Lets modernise that paragraph:
It’s understandable then that many investors who’ve diversified their portfolios with Bitcoin are concerned that the government could resort to Great Depression-era tactics to bail itself out again. The New York Times 2/2/21: By executive order The President today rewrote the laws and confiscated Bitcoin and all private cryptos.

There are only three certainties in life:
1) We will die
2) Human nature never changes
3) History always repeats because we never learn from history

Someone sounds scared

Hahahaa. Scared?? Maybe early retirement??

Just listened to Ciaran’s interview this morning. Quite long but go to around minute 16-17 and listen.

You can make a “flash loan” of say $25 million with no collateral. Think about it.

How can one still ignore crypto? The bankers are running scared.

The odds of Mr Carstens dying from a heart attack within a year is 100 times greater than Bitcoin dying.

I believe he is referring to a drop in the number of miners once the 21 million coin cao is reached… not sure if this will actually happen.

The fewer miners, the more vulnerable the system becomes to hacking, but we’re still talking about impssoble odds here.

The only real threat to the security of blockchain based systems (imo) is quantum computing as it may be able (but also unlikely) to account for 50% of the miner network for a transaction thanks to it sheer processing power dominace.

Really this is just fear mongering if you ask me, this guy bought high and he’s trying to get the price back down so that he can get out and give his wife her car back.

Basically, what Mr Carsten is saying in a very nice, firm way is that the world banking cartel is not going to allow, under any circumstances whatsoever, for decentralised cryptocurrencies to take over their monopoly of world finance that they have enjoyed for such a long time, ever. There you go. So we wait and see how all this is going to play out. Lots of drama still to come.

“If digital currencies are needed, central banks should be the ones to issue them.”

Well isn’t that EXACTLY the point – taking the backing and governance of of our hard earned money (by doing real jobs with real sweat in real time) out of the politicians that manipulate it (at their pleasure for their own aims by punching in their favorite numbers).

Bitcoin WILL break down one day.

But with a virtual twist…

ETH will break it. (Nothing else will break BTC, besides other cryptos showing promise.)

End of comments.

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