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No, Agustin Carstens, Competition Is Good For Our Monetary System

Agustin Carstens, general manager of the Bank for International Settlements (BIS) stated that he is an adversary of a Central Bank Digital Currency (CBDC). Carstens is also known as a strong opponent to the issuance and adoption of cryptocurrencies. However, against the latter, he argues that cryptocurrencies should not be issued by private entities.

Creating a One-Tier System?

Against CBDC he states that its existence would threaten our entire monetary system. According to Carstens, CBDCs would shift our deposit and lending system from private banks to central banks. Effectively, this “one-tier” system would centralize our economy.

“There are historical instances of one-tier systems where the central bank did everything. In the socialist economies before the fall of the Berlin Wall, the central bank was also the commercial bank. But I do not think we can hold up that system as something that will serve customers better.”

Carstens – a Conservative Centralist But Not a Socialist

Out of the crypto space, Carstens always looked like a strong advocate for centralization. However, his recent statements prove that he at least does not succumb to socialist economic fallacies. Still, the currency competition that started with Bitcoin is beneficial for us all. Especially, since central banks and state institutions, understandably, follow a rather conservative approach. As an advocate of the current monetary system, it makes perfect sense for Carstens to condemn Bitcoin & Co. However, the boom and bust cycles that this system creates along with the creeping inflation that expropriates holders and savers of fiat money make this system inherently unjust.

Currency Competition Could Alleviate Future Crises

The financial crisis of 2007/08 and the current situation in which everyone is fearing a global crash and the beginning of a recession again are direct consequences of our current fiat money system. With the creation of Bitcoin, the currency competition has just started. Maybe Bitcoin will become a viable option to fiat, maybe it will be a tokenized asset or maybe we will continue to use fiat money. But most likely our cash, the medium with which we pay in our everyday lives, will be a mix of all of them. And this could potentially alleviate the risks and the severity of future financial crises. This efffect would simply set in by diversification. The same principle that every asset manager applies to the creation of a reasonable portfolio.

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