2022 Events Cast 'Serious Doubts' on Stablecoins as Money: BIS Chief
The events of 2022 have cast "serious doubts on the ability of stablecoins to function as money," said Agustin Carstens, general manager at the Bank for International Settlements, during a Wednesday speech.
Stablecoins, which are cryptocurrencies pegged to the value of other assets like sovereign currencies, do not benefit from the regulatory requirements and protections that apply to bank deposits, Carstens, who leads the association of central banks from around the world, said while speaking at the Monetary Authority of Singapore.
Regulators and lawmakers the world over were skeptical of these cryptocurrencies even before the shocking collapse of algorithmic stablecoin ecosystem Terra in May – that set off a wider crypto market collapse and a string of high profile bankruptcies in the industry. This year, global standard setters have warned many existing stablecoins may not meet the tough standards they have planned for issuers.
Carstens – who had previously criticized stablecoins because of prevailing concerns they could shift power over monetary systems away from central banks to private entities that are "driven by profit" – instead praised tokenized deposits and central bank digital currencies that take advantage of the technologies tied to crypto but preserve the "trust" offered by public systems.
"However, there is an important lesson to be taken from stablecoins from a public policy perspective," Carstens added. "Stablecoins arose in part because some of the technical capabilities they provide cannot currently be met by existing forms of money."
Central banks must therefore engage with new technologies and look to innovate, or the private sector "will step in" according to Carstens. In 2021, the BIS signaled for central banks around the world to start exploring national digital currencies. Now, more than 100 jurisdictions around the world are considering whether to issue digital versions of their sovereign currencies.