16 Nov So, what do Central Bankers really think of bitcoin?
Another day, another central banker broadsiding bitcoin.
This time its Benoît Cœuré, a member of the Executive Board of the European Central Bank (ECB) who called the cryptocurrency “the evil spawn of the financial crisis.”
So, how do you really feel about bitcoin Benoît?
In his Welcome Remarks to the Economics of Payments IX conference in Basel yesterday Cœuré said:
“Lightning may strike me for saying this in the Tower of Basel — but bitcoin was an extremely clever idea. Sadly, not every clever idea is a good idea. I believe that Agustín Carstens summed its manifold problems up well when he said that bitcoin is ‘a combination of a bubble, a Ponzi scheme, and an environmental disaster’.”
On the other hand
Reflecting on the 10 years since the global financial crisis of 2008, Cœuré said central bank policymakers must learn from history in order to prevent a financial crisis from happening again.
Cœuré said, “the next financial crisis may well start as a cyber-incident. In recent years, these have grown rapidly in scale, scope, and sophistication. Failure to adequately protect against cyber-attacks may have far-reaching repercussions.”
He said digitalization is the breeding ground for cyber threats, citing the hacking and theft of $81 million from the Bangladesh Bank account with the New York Fed.
Crypto conundrums & CBDCs
The ECB leader said 10 years ago was the failure of Lehman Brothers, but it was also when the domain bitcoin.org was first registered and “Satoshi Nakamoto” posted his original Bitcoin whitepaper.
Cœuré said the Committee on Payments and Market Infrastructures (CPMI) published its first paper on distributed ledger technology in 2015. He said a survey of 80 central banks showed 69% are conducting work related to central bank digital currencies (CBDCs).
The ECB is closely monitoring CBDCs as Sveriges Riksbank prepares to issue the e-krona.
He highlighted two potential outcomes of distributed ledger technology, including “a wholesale payment application restricted to large-value and high-priority transactions, such as interbank transfers, or a widely available, consumer-facing payment instrument targeted at retail transactions.”
Cœuré called for more interdisciplinary research and cooperation. “Rapidly growing digitalization means both challenges and opportunities for payments. New technologies will reshape the way financial services are provided in the future. And they will pose new and virulent risks to the financial system,” he said as he wrapped up his speech to the central bankers of the world.
After all his posturing about cybersecurity and cryptocurrency, I’m not sure that central bankers who call bitcoin “a combination of a bubble, a Ponzi scheme and an environmental disaster” are ready to learn much about the new technology in these early days.
Some of these hidebound central bankers could learn a lot from listening to IMF managing director Christine Lagarde who speaks so eloquently about the potential for new technologies and cryptocurrency.