the Value of Cryptocurrencies: Points from Central Banks

In the past few days, policy makers of central banks around the world have made intensive voices, or expressed their views or evaluated the value of cryptocurrencies.

In these evaluations, they are roughly divided into two categories: one is to admit that Bitcoin is an asset, but not a currency, and it has no payment function; the other is to not recognize any value of Bitcoin.

Bitcoin ≠ Currency, Regulation should be Increased

Advanced economies, dominated by Europe and North America, are currently acknowledging the asset properties of cryptocurrencies, more of an increase in regulatory frameworks than bans.

International Monetary Fund (IMF) chief Kristalina Georgieva warned at the World Economic Forum in Davos on Monday against confusing crypto products with money. Any product without a sovereign guarantee can be an asset class, but not a currency.

Lagarde, the European Central Bank, said that while cryptocurrencies have no value, they will support a digital euro. Lagarde said: “I have always regarded cryptocurrencies as assets, not currencies. For any currency, someone needs to be held accountable, but for so-called cryptocurrencies That’s not the case with money. Also, money needs to be widely trusted, it needs to be universally accepted.”

Villeroy has also said there is a risk of “private” fragmentation from the disorderly development of crypto assets, including the misnamed “stablecoins.” If crypto-assets are not regulated, supervised and interoperated in a consistent and appropriate manner across different jurisdictions, they could disrupt the international financial system.

European Central Bank executive member Panetta said that cryptocurrencies are too risky to be used as a reliable means of payment, and that public funds in the digital age must remain the currency anchor.

Bank of England Deputy Governor Cunliffe said: “We are closely watching cryptocurrencies. “Crypto is now seen as a risk asset. We don’t think there is systemic risk in cryptocurrencies, but you can never be sure what triggers a loss of confidence. As quantitative tightening kicks in, we will see investors pull back A lot of retail investors don’t understand cryptocurrencies when they sell risky assets.”

In addition, the governor of the Bank of Thailand also recently stated that he still does not support the use of cryptocurrencies as a means of payment.

Active Regulation

Since January 2022, the U.S. Congress has introduced more than 80 bills related to cryptocurrencies, digital assets, blockchain and tokenization, an all-time high. It is reported that these bills are mainly divided into 6 categories, namely: crypto taxation, central bank digital currency (CBDC), digital assets and digital asset securities transparency regulation, blockchain technology support, sanctions and malware issues, and U.S. officials on cryptocurrencies Access and restrictions of use.

Pablo Hernández de Cos, president of the Bank of Spain and chairman of the Basel Committee on Banking Supervision, said the cryptocurrency space and decentralized finance (DeFi) need to be regulated quickly to avoid the risk of financial instability.
He also mentioned how the crypto financial system should be brought into regulation before it gets bigger. In addition, he recommends a “proactive and forward-looking regulatory approach” to the topic, claiming that a balance can be struck between welcoming these technologies and reducing their risks.

The government of Cyprus said on May 20 that it has prepared its own legislation to regulate crypto assets and may implement it before a common regulatory framework is finalized in Europe.

Norges Bank says better regulation of crypto assets and services is needed.

“Shielding” Bitcoin

Although cryptocurrencies are widely recognized in some countries, the number of countries and regions that have imposed bans on cryptocurrencies is also growing.

The Central Bank of Argentina (BCRA) recently announced that it would ban banks in the country from offering cryptocurrency services to customers. The BCRA statement said that banks are prohibited from providing services to any digital asset that is not regulated by the central bank, which amounts to a de facto ban as digital assets are currently not regulated by the Argentine government.

On May 23, the governor of Sri Lanka’s central bank stated that Sri Lanka does not recognize cryptocurrencies.

The Governor of the Central Bank of Jamaica, Richard Byles, recently made it clear that we are staying away from cryptocurrencies.

The governor of Kenya’s central bank has spoken out against crypto trading, saying financial institutions that support such transactions could lose their licenses.

Bank of England Governor Andrew Bailey recently spoke on the future of Bitcoin and cryptocurrencies on the “Jobs of the Future” podcast, saying that Bitcoin has no intrinsic value and is not a practical payment method. Bailey believes Bitcoin can only have extrinsic value, which simply means that people want to own and acquire it as a store of value.

India’s policy on cryptocurrencies is more ambiguous. However, RBI Governor Shaktikanta Das has repeatedly stated that cryptocurrencies have no potential value. He firmly believes that cryptocurrencies could “severely disrupt” the country’s financial system. Das also noted that the recent cryptocurrency market correction justifies his cautious approach to cryptocurrencies. He emphasized that the country’s central bank is in line with the government when it comes to cryptocurrencies.


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