After the official announcement of Libra, Agustín Carstens, the general manager of the Bank for International Settlements (BIS), revealed that central banks may adopt digital currencies sooner than we expect. The fear is that big tech groups such as Facebook could establish a dominant position in global finance and pose a potential threat to competition, financial stability, and social welfare. This according to an annual report from the BIS, June 30th, 2019.
Apparently, the financial status quo seems to be still in the bargaining phase, the third in the five stages of grief; to be more precise, it seems as though central banks are considering the developlment of their own digital currencies in order keep up with “rapid economic and technological changes.”
The news comes directly from Agustín Carstens, the general manager BIS, who explains how they are supporting the efforts of the national central banks in the development of central bank digital currencies (CBDCs).
One of the banks at the top of the list is the Riksbank, the central bank of Sweden, one of the world’s most cashless societies in the world where also beggars and buskers accept payments via their PoS terminals.
The Global Economic Picture
In its annual report, published on Sunday, the BIS asked governments to take some weight off of central banks in supporting the economy by unveiling more fiscal policies and structural reforms. Mr. Carstens specifies that aggressive monetary policies are not a sign of sustainable long-term economic growth. On the flip side, keeping monetary policy ultra-loose can create greater financial risks.
The comment could refer to maneuvers that the Federal Reserve and the European Central Bank (ECB) could utilize to boost confidence in the global economy. For example the US central bank should cut interest rates at the end of the month, as well as the fact that Mario Draghi, President of the ECB, announced that he could cut rates or restart the expansion of its €2.6tn quantitative easing program of bond buying in response to investors’ fears that growth is set to slow sharply.
The problem is that these monetary policies are not adequate and the slowdown in economic growth is mainly generated by trade tensions, thus investors’ fear is based on geopolitical uncertainty.
A Change of Position
Agustin’s statements are a real novelty. Previously, he has been very vocal about his discontent with the crypto-industry and about the possibility of CBDCs.
As discussed on BTCManager, his most recent comments came during a March 22, 2019 speech at the Central Bank of Ireland in Dublin where he said that the idea of central bank-issued tokens is a symptom of financial panic.
It may still take years before central banks develop their “Tether”; however, this push of technological giants together with various macroeconomic tensions could be the catalysts to speed up the whole process. “If you can’t beat them, join them,” could well be the mantra for the world’s central bankers.