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Cryptocurrency is a poor substitute for fiat money, claims the Bank of International Settlements in a chapter of its annual report[1], released on June 17. In a solid and neatly formatted document laden with footnotes and graphs, the BIS’ experts present a particular historical view on money that they use as a vantage point in establishing the alleged superiority of stalwart centralized institutional arrangements over the chaos of permissionless distributed ledgers. How robust is their argument?
The sender is the message
Before delving into the substance of the claim, a brief review of where it comes from is instrumental. The Bank of International Settlements is an institution owned by the world’s 60-largest central banks that together command 95 percent of global GDP[2]. The Bank’s mission[3] lies in promoting cooperation between central banks, for the sake of global monetary and financial stability. Some particular areas of the BIS’ jurisdiction include setting the standards of capital adequacy as well as ensuring liquidity and transparency of central banks’ reserves. In addition to the cooperation and supervision functions, the BIS serves as the ‘bank for central banks,’ by operating as a counterparty in their financial transactions, for example.
In short, this institution — which tends to be less in the public eye than other global giants of similar standing, such as the World Bank or the International Monetary Fund — is clearly one of the pillars of the incumbent global financial system. Furthermore, its focus on financial stability arguably puts the BIS in the position of being the main guardian of the global status quo. Keeping this in mind provides a framework to approach the Bank’s
