BIS Chief Says Algorithms and Private Companies Will Not Provide the Same Trust in Money as Central Banks

According to Agustin Carstens, Governor of the Bank for International Settlements, central banks are the best option for ensuring trust in money in the era of digitalization.

Speaking today at a conference at the UniversityGoethe, he said that trust – this is the “soul” money that neither anonymous decentralized technologies nor large technology companies have. Any alternatives are primarily focused on profit, so transferring the levers of control of the monetary system to private projects may end badly.

Alongaccording to Carstens, stablecoins andDecentralized finances are quite interesting developments, but without proper oversight, they can fragment the monetary system. Adding that in fact DeFi is subject to the same vulnerabilities as traditional finance, and decentralization is just an illusion.

He argued that the mechanismsblockchain consensus tends to concentrate power, which over time, control of the ecosystem passes into the hands of a small group of participants who make all the important decisions. As a result, this can undermine the credibility of such a system.

The head of the BIS proposed several possible scenariosevolution of money in the future. The first assumes that several of the largest technology corporations will begin to issue their own currencies and provide financial services around the world. According to the second, the monetary system will become decentralized and completely devoid of human control and institutions, which will be replaced by blockchain and algorithms.

The third scenario involves the formationan open global monetary and financial system in which technology works for the benefit of society. In this case, private companies and central banks are collaborating, competing to provide better and more affordable services. At the same time, all the proposed systems are compatible, and users can interact with each of the providers.

Agustin Carstens believes that central banks should strive to implement the third scenario.

text: Ivan Malichenko, photo: Getty Images