The Financial Elite: Bad Bitcoin, Good CBDCs, Meh Stablecoins

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What is BIS and why care what they think?

BIS stands for Bank for International Settlements; it is basically the hub for all Central Banks. Its mission is to support central banks in their search for monetary and financial stability through international cooperation and acting as a bank for central banks.

Cryptocurrencies are at an important inflection point. While Central Bank Digital Currency Projects (CBDCs) are poised to increase government control over individuals, cryptos and stablecoins are opposed, allowing permissionless transactions that can bypass traditional banking systems.

This article is a compilation of quotes and highlights from the second BIS Innovation Summit, held March 22-23, 2022, which showcases how the financial powers are thinking about cryptocurrencies.

While some despise the financial elite and consider their opinions useless, I take the opposite approach. The prudent investor should seek to understand their ideas and agenda. They have great power to direct regulations and laws that will severely affect the future of finance and the portfolios of those who own crypto assets.


In the welcoming and opening speech, BIS General Manager Agustin Carstens emphasized sustainability as a core value of financial systems and said:

The financial system of the future must not present undue risks to the environment. Excessive energy consumption related to some cryptocurrencies is an example of this. They show what can happen when technological products are developed without regard for their broader social consequences.

Shots fired! This is clearly a Bitcoin (BTC-USD) and Ethereum (ETH-USD) slam (for now) due to the need for electricity-intensive Proof of Work mining.

In the same session, François Villeroy de Galhau (President, Board of Directors and Governor of BIS, Bank of France) followed up with:

The use of bitcoin as a means of payment remains very marginal because it does not have any of the currency’s fundamental characteristics nor is it really a store of value, but rather a speculative asset somewhat similar to 17th century Dutch tulip bulbs.

This is Peter Schiff’s no intrinsic value argument. Or as I like to post on Twitter, “nO inTrinSic vALue” Fun fact: mixed capitalization is a SpongeBob meme. It is based on repeating something in a childish way to mock.

European Central Bank President Christine Lagarde comments:

I’m talking about crypto assets here. Was it a threat in the past? Yes, because when you look at many of the dubious transactions that are taking place, many of the criminal activity payments that are taking place very often you find some crypto assets. I won’t mention any names, but we know what we’re talking about here.

What is she talking about? Bitcoin, of course.


There were no speakers in 2022, but Joseph Lubin, one of the founders of Ethereum, participated in a panel last year called CeFi to DeFi: Can global finance be de/rebuilt?

There were some mentions of Ethereum during the panel discussions, but nothing for or against by any of the keynote speakers. In contrast, Bitcoin was the poster boy for everything wrong in crypto.


Andrew Bailey (Governor of the Bank of England) emphasized that DeFi and cryptocurrency do not live in a separate world where normal rules do not apply, a world of libertarian principles that operate independently.

We operate on a single system.

He also introduced the idea of ​​Central Banks as a controlling mind or institution that sets rules and regulations for the public. In contrast, he characterizes DeFi as operating on artificial intelligence. Can there be a world where there is no human mind control? His answer is no, but he admits that DeFi will make design regulations much more complicated.


In the welcome session, François Villeroy de Galhau says:

Among the second-generation crypto assets, called stablecoins or bank assets, try to reduce their volatility by anchoring themselves in fiat currencies and sovereign assets. Yet they create fragmentation and… regulatory and operational uncertainties. Here, too, there are historical precedents, Free Banking in the 18th and 19th century, when each private bank issued its own note.

It is true that some algorithmic stables are anything but stable, losing their peg. But USDC is public, asset-backed, open-source, and audited monthly to prove its reservations. Nic Carter refutes the Free Banking comparison and shows how the monetary elite is often misguided about stablecoins.

Christine Lagarde pointed out in her interview session that it doesn’t have to be a choice between stablecoins and CBDCs.

John Williams (Chairman of the Federal Reserve Bank of New York) stated that stablecoins have the potential for cross-border and wholesale payment purposes. But the standard concerns apply: investor protection, financial stability, transparency, very secure backing and reliable conversion back to the dollar during times of market stress to avoid a bank-run situation.

Williams also gave the view that cryptocurrencies often have fundamental flaws. They do not serve as a medium of exchange due to fluctuating values, lack of transparency and extreme cost of transactions. It also signals the environmental cost of some, another reference to Bitcoin.

Those speakers who fully understood the stables made a clear distinction between asset-based and fully regulatory-compliant currencies versus less reliable algorithmic currencies.


Also from Carsten’s opening speech:

CBDC is a particularly important priority for the [BIS Innovation] Hub with five projects completed and at least three more this year. These include work on retail CBDCs for the general public and wholesale CBDCs for use by financial institutions, particularly in the form of multi-CBDC agreements that will make international payments faster, cheaper and more efficient.

Christine Lagarde said Euro Digital is on time and on budget so far. From here, it will be a two-year journey before moving on to the last phase of experimentation and implementation.

Brian P Brooks (Bitfury CEO) during the panel, Does DeFi need sovereign cash? offered this perspective:

What all this says about the payment system has a lot to do with Central Bank Digital Currencies taking over, in which case we won’t need DeFi as part of the payment system. At this point, you will have a central command and control system for clearing payments. And we kind of see what that looks like. I return to the Canadian truckers’ protest as an example of when governments take over the system. At this level, they can determine what is paid and what is not, which shipments are canceled and which are not.

Brooks made an important note about CBDCs that I will expand on in the Takeaways section of this article.

During its session, Jerome Powell (Chairman of the Board of Governors) points to the recently published discussion paper on the future of money. While the Fed has not made any decisions on whether to issue a CBDC or design the technology, they have outlined four key principles that guide their thinking. A CBDC would need to 1) ensure user privacy, but also 2) have verifiable identity to prevent money laundering and terrorist financing. A US CBDC would be 3) brokered by the current banking system to leverage the private sector’s ability to innovate, manage identity, and exercise AML frameworks. Finally 4) it would serve as a widely accessible means of transactions between customers of different intermediaries.


As with the first BIS Innovation Summit, no Ripple speakers or speakers were present and there was no mention of Ripple or XRP during any session. I have more analysis on the outlook for Ripple and XRP here.

Conclusion and conclusions

Luiz Pereira da Silva (Deputy General Manager, Bank for International Settlements) provided an adequate summary of the thinking of the BIS and the Central Bank during the Closing session.

Digital innovation is reshaping the world around us, including the financial world. This can lead to opportunities, but also challenges. New opportunities can promote greater efficiency and inclusion, but they can also bring risks of instability and fragmentation of exclusion. Central Banks need to be at the forefront of these developments to ensure that technology is a force for positive transformation; they need to not only implement policies to deal with these changes, but also innovate.

My conclusions (these are strictly my opinions):

Central Banks: Desire to maintain their status quo through gatekeeping technology and innovation. Their ideological position is that humans should manage financial systems, and they are the best people to do so.

Cryptocurrencies in general: Bankers reject the validity of cryptocurrencies but see the opportunity to repurpose the underlying technology to build CBDCs.

Stablecoins: With the exception of a few like USDC, all will eventually be targeted by regulators. Circle (the issuer of USDC) will avoid this by working within the system to become a crypto bank.

CBDCs: continue to be a priority for the BIS and Central Banks. While most say no decisions have been made yet, the seductive nature of additional financial control through this technology will be irresistible. This will be draped in the sacred robes of AML, KYC and anti-terrorism, but will result in additional government control of transactions unless stopped.

Bitcoin: According to central bankers, Bitcoin is anti-environment, has no intrinsic value and is used by criminals. I believe the climate change argument against Bitcoin is the main reason why institutional buying has dried up and the price is still 40% below the all-time high. A word to the wise: environmental concern is a real problem, it has no easy solution and is likely to get worse.

Ethereum: As Ethereum moves from proof-of-work to proof-of-stake later this year, it may escape characterization of being an environmental offender. At that point, it can become the approved and environmentally friendly cryptocurrency for institutional adoption. And then watch out.

XRP and all other cryptocurrencies: not even on your radar. The financial elite is very transparent with their agenda. Aside from hating Bitcoin, loving CBDCs, and being tolerant of some stablecoins, they just aren’t talking about other tokens. Sorry guys.

DeFi: It’s taken seriously as a threat to legacy systems, but bankers are struggling with an answer. Like all other financial products, the main objective is to bring DeFi into current systems to enforce regulations.

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