BIS calls for caution on bitcoin

On the 02/02/21 at 7:34AM


Pauline Armandet

Its managing director believes that bitcoin could “collapse completely”. It has levelled off at about $33,000.

With bitcoin taking its place as a favourite asset of investors, the Bank for International Settlements (BIS) has called for caution. “Investors must be aware that bitcoin can collapse completely,” said Agustín Carstens, BIS’s managing director before the Hoover Institute. He considers bitcoin a “community of online gamers, who exchange real money for items that only exist in cyber space.”

Cartsens also issued a critical view of Diem, Facebook’s planned cryptocurrency. Although this plan is “certainly more credible than bitcoin”, private stable coins initiatives “cannot serve as the basis of a healthy monetary system” and must be regulated and built on the “foundations and confidence that the existing central banks give.”

To the BIS, digital currencies must be issued by central banks. To date, 86% of the 65 central banks surveyed by the BIS are conducting experiments on central bank digital currencies (CBDCs). However, an IMF survey found that 80% of central banks are not able to issue digital currencies, due to legal obstacles. “It is up to individual jurisdictions to decide whether they issue CBDCs or not. But if they do, issues such as “digital dollarisation“ and the potential role of CBDCs in enhancing cross-border payments need to be addressed in multilateral forums,” Carstens said.

Despite the BIS’s wary tone, the cryptocurrency community continues to expand. On Friday Elon Musk triggered euphoria on the market in mentioning bitcoin on his Twitter account, which has 44 million followers. Bitcoin’s price surged by 8000 dollars before returning to its initial level of about 33,000 dollars. “I believe that at this point, bitcoin is a good thing,” the Tesla boss said in an interview on the Clubhouse app. “I think bitcoin is on the verge of getting broad acceptance by conventional finance people,” he added.

Meanwhile, Coinbase, a cryptocurrency exchange platform, on which bitcoin is traded, announced that it would float its shares via a direct listing. So it will not issue new shares and existing investors will not be bound by lock-ups. The direct listing date has not been specified.  Coinbase last month filed an S-1 form with the Securities and Exchange Commission (SEC) for its planned IPO. “The Form S-1 is expected to become effective after the SEC completes its review process, subject to market and other conditions,” Coinbase said.

Coinbase claims 43 million users and $90bn in assets on its platform. This would be the first Wall Street IPO of a cryptocurrency platform.

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