Crypto lost the battle to be an alternative to fiat money after FTX collapse, top economist says

• Agustin Carstens, the head of the Bank for International Settlements, said crypto is not a replacement for fiat currencies.

• "Only the legal, historical infrastructure behind central banks can give great credibility [to money]," the economist told Bloomberg.

Fiat money has beaten out an often-cited use case for certain cryptos — an alternative to traditional currencies, according to Agustin Carstens, the head of the Bank for International Settlements.

"I think that battle has been won," he told Bloomberg TV on Wednesday. "A technology doesn't make for trusted money."

Crypto proponents often tout blockchain technology as a way to solve inefficiencies in traditional monetary systems.

Bitcoin can be used to conduct borderless payments without spending exorbitant remittance fees. From its network's inception in 2008, bitcoin was described as a "purely peer-to-peer version of electronic cash [that will] allow online payments to be sent directly from one party to another without going through a financial institution," according to its whitepaper.

The immutable and transparent nature of a distributed ledger can be seen as a value add for users who don't want to (or can't) go through third-party intermediaries like banks. However, investors have to be able to stomach the volatility that comes with an emerging technology, along with accessing a digital wallet.

Carstens also pointed to the downfall of crypto exchange FTX — which US prosecutors have described as one of the "biggest financial frauds in American history" — for further hesitancy towards digital assets. Regulation, Carstens added, will likely strengthen because of the fallout.

The industry was already having a tough year when FTX filed for bankruptcy in November, with the market cap diving by two-thirds since its all-time high in November of 2021. However, FTX's downfall caused a crisis of confidence in the nascent space from outsiders as well.

"Only the legal, historical infrastructure behind central banks can give great credibility [to money]," per Carstens, adding that crypto can really only exist "under certain conditions."