Central Bankers Sound Off on Crypto. And?

Welcome to Bloomberg Crypto, our twice-weekly look at Bitcoin, blockchain and more. In today’s edition, Anna Irrera checks in at a central bank confab on crypto:

When central bankers meet

Inflation is rampant, the global economy is on the brink of a recession and stock markets have shed trillions of dollars

It was against that backdrop that Federal Reserve Chair Jay Powell, European Central Bank President Christine Lagarde and Agustin Carstens, head of the Bank of International Settlements, convened on Tuesday to discuss, of all things, the tokenization of finance. What followed was a string of admonishments about crypto’s pitfalls that the officials now have had months, or even years, to rehearse. 

Make no mistake: The last few months have shown beyond a shred of doubt that more oversight — and accountability — is desperately needed in digital assets. But the jaded observer might be excused for thinking that the warnings had a somewhat hollow ring to them. 

Statements ranged from the fairly bland (Powell: “There’s a real need for more appropriate regulation”) to the obvious (Banque de France Governor Francois Villeroy de Galhau: “We should be extremely mindful to avoid adopting diverging or contradictory regulations, or regulating too late”) to the self-deprecating (Singapore central bank chief Ravi Menon: “But who listens to central bankers, right?”). 

And while the central bankers had compelling reasons to repeat their warnings, policy makers are now faced with a number of acute crises to deal with — not least the global recession Powell & Co.’s monetary tightening appears to have made all but inevitable. 

What priority will German politicians assign to stablecoin regulation when factories may be without power this winter? Or new UK Prime Minister Liz Truss, faced with a currency in free-fall and the prospect of a credit rating downgrade? It wouldn’t be entirely surprising if overhauling crypto rules gets put on the back burner. 

That doesn’t mean crypto’s concerned observers should fret. The industry has been shaking out somewhat organically. Terra inventor Do Kwon is “on the run” — as Lagarde put it at Tuesday’s panel — and facing arrest in South Korea. Alex Mashinsky, whose bankrupt Celsius Network Ltd. has left creditors and customers in the lurch, just resigned. A string of other crypto CEOs have called it quits, chastened by vanishing profits and changing dynamics. And lawmakers and regulators are starting to take steps, however tentatively, to clarify policy, with legislative proposals for new rules emerging in the US and Europe. 

So maybe real change is afoot, after all. But whether it comes as a result of central bank chiefs trading truisms at conferences, or a zealous South Korean prosecutor pulling all-nighters in Seoul, is up for debate.

Charting it out

Hearing them out

What we’re reading (and writing)

• Bitcoin Could Be as Bad for the Planet as Beef
• Crypto Leadership Upheaval Gives Fresh Jolt to Industry
• The Crypto World Is on Edge After a String of Hacks (New York Times)
• SEC Says Backers of Crypto Token Hydro ‘Airdrop’ Broke Its Rules
• Stanford Proposal for Reversible Ethereum Transactions Divides Crypto Community (CoinDesk)
• Crypto Crash Was Good for Industry, Weeded Out ‘Tourists’

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— With assistance by Tanzeel Akhtar and Emily Nicolle