Bankers are enjoying the collapse of cryptocurrencies – POLITICO

With the help of Derek Robertson

It was a difficult period for the world’s leading central banks.who are faced with the need to tame high prices without destroying their economies, now that persistent inflation has challenged their predictions. It doesn’t help that they are facing this problem amid an explosion of interest in cryptocurrencies, a technology invented to completely circumvent their power.

But the last few months have been even tougher for the cryptocurrency. As crypto markets melt, central banks are seizing the moment.

Yesterday, when the Bank for International Settlements published its 115-page annual economic report, he devoted the last third to a detailed analysis of cryptography and decentralized finance. The BIS is the most institutional of the institutional players – an international organization that acts as a bank for central banks and is also owned by central banks.

The report looks at the collapse of the algorithmic stablecoin Terra last month, arguing that the fiasco points to fundamental flaws preventing the success of any monetary system not backed by central banks.

In short, the report claims that cryptocurrencyunsuitable as a basis for a monetary system,” citing issues such as scalability and trust. “A system based on central bank money,” he concludes, “offers a stronger foundation for innovation.”

In recent years, articles published under the auspices of the Bank have moved from a dismissive to a defensive approach to cryptocurrencies. “Cryptocurrencies have failed,” said January 2020 report who has researched central banks around the world. But at the end of that year, the crypto markets took off, and more recently, several small countries experimented with national adoption of Bitcoin as an alternative to sovereign currencies.

By April of this year paper published in emerging markets, it discussed at length the risk that the widespread use of a cryptocurrency or a foreign-pegged stablecoin could lead to a sharp decline in the use of a country’s currency, undermining the ability of its central bank to implement monetary policy. The paper describes the existence of affordable payment systems for sovereign currencies as a “line of defense” against the adoption of cryptocurrencies.

Meanwhile, a bank survey published last month found that 60 percent of central banks are more urgent in developing their own versions of a digital currency due to the rise of the stablecoin and cryptocurrency markets.

Thus, the ongoing collapse of the cryptocurrency markets and decentralized finance offers central banks a welcome respite as well as an opportunity to advance their own vision of the future.

The report argues that the current system should use cryptographic-related innovations such as distributed ledgers and smart contracts, and even attempts to present the mundane world of financial infrastructure in more poetic terms.

“The tree is a metaphor for the future monetary system,” it says. “With a strong central bank-backed trunk, the tree contains a rich and vibrant ecosystem of private sector service providers.”

The arguments raised against the viability of cryptography are not entirely new. In fact, while arguing that blockchain systems face an inevitable trade-off between scalability, security, and decentralization, he cites the work of Ethereum founder Vitalik Buterin, who called this contradiction “scalability trilemma“Although Buterin and the Bank come to very different conclusions about the meaning of the trilemma.

Buterin conceived Ethereum at the age of 19. To understand what public figure he’s cutting out, look no further than this. 2019 video, where he stars in a painfully awkward rap and dance program dedicated to technical updates to his blockchain code. Central bankers, on the other hand, have long enjoyed majestic omnipotence.

So it’s amazing to see their umbrella group posting a diagram of “Buterin’s scalability trilemma” – not to mention asking readers to close their eyes and imagine a forest…

In this sense, the Bank’s report offers a memorable snapshot of this moment in time, when one of the pillars of the global system is resisting technological onslaught and making the case for a central role in guiding the future.

Between the leak CaviarX Looming over the then rollback and the actual decision overturning it, Russian protest art collective Pussy Riot traveled to the Texas State Capitol, unfurling a 45-foot banner and creation of NFTs to celebrate this event.

Over the weekend, the DAO, or “decentralized autonomous organization” affiliated with the group, launched new work to expand and support access to abortion. UnicornDAO, co-founder of the group Pussy Riot Nadya Tolokonnikova. On Saturday, the group opened crypto walletLegalAbortion.eth to function as a donation hub for traditional abortion organizations like Planned Parenthood that don’t yet have the funds to accept cryptocurrency.

DAO organizers will distribute funds from a wallet that currently contains the equivalent of more than $10,000 in donationsseven organizations including PPFA, NARAL, and several state and regional foundations such as the Texas Choice Fund. Twitter UnicornDAO. Tolokonnikova has experience in crypto-altruism, and also has helped found UkraineDAOwhich raised millions of dollars to support the country in its war against Russia.)

Pussy Riot are among the many activists trying to use the frenzy around crypto — and the close-knit, often hectic sense of community it generates — as fundraising tools, as we wrote about it. in DFD last week. Derek Robertson

Coinbase, the largest US crypto exchangeis the latest US tech giant to fend off European regulators.

As Bjarke Smith-Meyer of POLITICO reported todaythe company’s chief political officer, Faryar Shirzad, traveled to Brussels last week to lobby regulators ahead of the upcoming EU meeting. Crypto asset regulation markets. The EU is expected to take an aggressive stance aimed at combating fraud and money laundering, as well as reducing exposure to disasters such as the collapse of the not-so-stable Terra coin.

Coinbase, however, hopes to insulate itself from MiCA’s potentially far-reaching possibilities, namely that it doesn’t want to be held responsible for things like crashing currencies or verifying the identity of its users.

“It is very important not to put platforms like us in a position where we are responsible for things that are beyond our control,” Shirzad Bjarke said. “Our goal is to make sure that responsibility lies in the right place.” What the “right place” is may ultimately depend on the means, legal or otherwise, by which cryptocurrency mavens make their money under a regime that is becoming more and more regulated every day. Derek Robertson

Stay in touch with the entire team: Ben Schrekinger ([email protected]); Derek Robertson[email protected]); Konstantin Kakaes (ur.[email protected]); and Heidi Vogt ([email protected]). Follow us on Twitter @DigitalFuture.

Ben Schrekinger writes for POLITICO on technology, finance and politics; he is a cryptocurrency investor.

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