Bank of International Settlements Releases a Negative Stance on Cryptocurrencies

The Bank of International Settlements (BIS) has finally published a new research on cryptocurrencies in its annual report on Sunday, which is about 24 pages long. Based on the review, it looks like the central banks’ perspective is not as bright as it can be, suggesting that “many cryptocurrencies are ultimately get-rich-quick schemes”.

The review also emphasized on the notion of trust consumers have in the firm issuing assets under consideration and that when it comes to cryptos, it is not up to par. For any form of money to work across large networks it requires trust in the stability of its value and in its ability to scale efficiently, the BIS, an umbrella group for the world’s central banks.

But trust can disappear instantly because of the fragility of the decentralized networks on which cryptocurrencies depend, the BIS said.

Those networks are also prone to congestion the bigger they become, according to the BIS, which noted the high transaction fees of the best-known digital currency, bitcoin, and the limited number of transactions per second they can handle.

“Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded,”

BIS went on to say that cryptocurrencies are too unstable, consume too much electricity, and are subject to too much manipulation and fraud to ever serve as bona fide mediums of exchange in the global economy. It cited the decentralized nature of cryptocurrencies like Bitcoin and its imitators are created, transacted, and accounted for on a distributed network of computers, as a fundamental flaw rather than a key strength.

The BIS has told central banks to think hard about the potential risks before issuing their own cryptocurrencies. No central bank has issued a digital currency, though the Riksbank in Sweden, where the use of cash has fallen, is studying a retail e-krona for small payments.

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