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Crypto Crackdown: Bitcoin is a ‘Combination of Bubble, Ponzi Scheme, Environmental Disaster’

Broken representation of the Bitcoin virtual currency, placed on a monitor that displays stock graph and binary codes, are seen in this illustration picture, Dec. 21. PHOTO: Dado Ruvic/Reuters

‘If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability.’

By Wolf Richter | 7 February 2018

WOLF STREET — The official crackdown on the entire cryptocurrency space got a new and broader framework from Agustín Carstens, General Manager of the Bank for International Settlements (BIS) and former governor of the Bank of Mexico. In a lecture in Frankfurt on Tuesday, he let fly some real zingers interspersed with indications of what is to come. He clarified the main concern – that the crypto ecosystem, as it “piggybacks” on the financial system, transfers its risks to the financial system.

Here are some excerpts from his lecture that I think are very insightful views of how bank regulators will be looking at the crypto ecosystm.

He said, “We are seeing the type of cracks and cheating that brought down other private currencies starting to appear in the House of Bitcoin”:

Debasement.

“In Bitcoin, these take the form of forks, a type of spin-off in which developers clone Bitcoin’s software, release it with a new name and a new coin, after possibly adding a few new features or tinkering with the algorithms’ parameters. Often, the objective is to capitalize on the public’s familiarity with Bitcoin to make some serious money, at least virtually.” […]

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