Central Bankers’ Opinion on Crypto is Loud and Clear at Davos

5/24/2022

Economy

0 min read



Image: World Economic Forum (May 24, 2022)

Cryptocurrencies in the Hot Seat at World Economic Forum

Considered by some to be controversial, the annual World Economic Forum (WEF) in Davos, Switzerland, each year impacts thinking on everything from economics, health care, environmental actions, and currencies, including cryptocurrency. This year’s summit is full of crypto-related companies seeking attention and a say. Its been over two years since the last meeting because of the pandemic, since then crypto has gained a strong foothold in many of the subjects covered at the WEF. Many crypto-related stakeholders bought exhibitor space and are attending the event. Their plans to be at this Swiss ski resort were made before the recent selloff and problems with the stablecoin TerraUSD.

The Establishment Speaks

Change will always be fought off by whatever is currently in place until or unless it can become a part of it. Cryptocurrencies and stablecoin fall solidly in this category, and it was made loud and clear at the World Economic Forum. Below are some topics discussed and what was said:

Is Bitcoin money? “Bitcoin may be called a coin but it’s not money. It’s not a stable store of value,” said Kristalina Georgieva, managing director of the International Monetary Fund.

Is crypto a good payment system? “Cryptocurrencies are not a reliable means of payment. Someone must be responsible for the value, and it must be accepted universally as a means of exchange. It’s not,” Villeroy said, noting that some “citizens have lost trust in crypto” because of the massive volatility.

How likely is it that cryptocurrencies and stablecoins
will be used as currency? In a panel discussion, central bankers and regulators were in more or less agreement that the recent plunge of Bitcoin, Ethereum, Luna, and TerraUSD is not behavior desired in a currency.

Are Central Bank Digital Currencies likely? Some cryptocurrencies are more akin to a pyramid scheme for the digital age because they aren’t backed by real assets, explained Kristalina Georgieva. She does however believe Central Bank Digital Currencies (CBDCs) supported by governments can be stable.

François Villeroy de Galhau, a governor of the Central Bank of France, concurred, adding that governments looking to adopt digital currencies must do so in partnership with large commercial banks.

What is the real role of cryptos? Sethaput Suthiwartnarueput, a governor of the Bank of Thailand, said that Thailand has been experimenting in the world of digital currencies. But he said it “has to be clear what problem you want to solve.”

“We don’t want to see it as a means of payment,” Suthiwartnarueput said, adding that cryptos are more of an investment than a medium of exchange.

Do they see private crypto benefits? Francois Villeroy mentioned that the experiment by El Salvador to use bitcoin as legal currency shows how risky it can be to embrace cryptocurrencies.

Georgieva noted that digital money could be a “global public good” that can help people send remittances across borders. The key is for interoperability so that it is just as easy to transfer digital currencies as it is paper-backed currencies like the dollar and euro.

Timeline? Panelists wanted to be clear that it will take time for digital currencies to evolve and become mainstream for consumers, major financial institutions, and governments.

Take-Away

While firms involved in digital currencies were out in force during the World Economic Forum, the recent selloff in crypto values provided less strength and enthusiasm. Particularly unenthusiastic were regulators and bankers. Their presentations and forum discussions show it may be a tougher sell than many private crypto advocates may hope for.

Paul Hoffman

Managing Editor, Channelchek

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