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The Director General of the International Settlement Bank, Agustin Carstens, said that the events of last year "raised serious doubts about the ability of the stabilizers to function like money."
In a Feb. 22 speech, the bank chief argued that what sustains fiat currency is not novel technologies but “the institutional arrangements and social conventions behind it.”
According to Carstens, stability does not enjoy the credibility of sovereign fiduciary currencies, and the lack of clarity of regulation affects it. Carstens said:
“[Stablecoins] do not benefit from the regulatory requirements and protections applying to bank deposits. They do not install themselves in the money of the central bank or benefit from the support of a lender of last resort. As a result, they cannot guarantee that money is unique."
In a separate Bloomberg interview, the bank chief said he anticipates strengthened regulation of the digital-asset sector from the G20.
Over the past year, Terra's failed algorithmic stablecoin and subsequent FTX has strengthened the regulatory review around the crypto industry. Regulators worldwide have introduced various measures to stave off the impact of such future fall-outs from the broader financial sector.
Meanwhile, Carstens believes tokenized deposits and central bank digital currencies (CBDCs) can make the financial industry more efficient.
“CBDCs reproduce existing forms of money in a more technologically advanced manner."
Carstens said CBDCs will play the role of central bank money in the current system, while tokenized deposits may be commercial bank money.
"Token deposits and CBDCs may also open the door to more efficient payment arrangements in the business environment or for larger purchases."
The head of the BIS also pointed out that the technology underlying cryptography could always be applied to the financial sector to achieve the best results.
Central banks have a responsibility to ensure that they contribute to the development of infrastructure that meets these requirements: if central banks are not innovating, Others are going to get involved," he said.
The SEC's advice to Paxos to stop hitting BUSD may have long-standing implications in the crypto marketplace. The new cryptoslate report explores the recent and potential impacts of paxo enforcement actions.
