The Bank for International Settlements (BIS), in a report to the finance ministers of the world’s twenty largest economies, said that structural flaws in the nature of cryptocurrency render it inappropriate for use as a monetary instrument.
“They Can’t Finance Real Economic Activities”
In the report presented by the BIS, which brings together the world’s leading central banks, to the finance ministers of the world’s twenty largest economies, instability, inefficiency, and accountability issues were highlighted more than the potential innovative benefits of cryptocurrencies, such as automatic payments.
The report, prepared for the G20 finance ministers and central bank governors meeting to be held in Gandhinagar, India this weekend, said that despite the inclusion of millions of individual and institutional investors in the growing sector, “Cryptocurrencies have so far failed to use innovation for the benefit of society.”
The report stated, “Cryptocurrencies largely continue to self-reference and do not finance real economic activities,” adding, “They are not suitable to play a significant role in the monetary system due to structural flaws.”
The Collapse of FTX and Terra Highlighted in the Report
The BIS report comes after a tumultuous year for cryptocurrencies. The report talks about the losses stemming from the collapse of the FTX and Terra ecosystem, hacking and rug pull risks, and blockchains that have grown too large to reach the size that a comprehensive payment system would require, facing scaling issues due to congestion.
The doubts of central bankers about cryptocurrencies are not new, considering the fear that new payment systems could disrupt or displace the system in which traditional fiat currencies are involved.
The cryptocurrency market, which set a record by reaching a market value of 2.97 trillion dollars on November 10, 2021, continues to increase its value despite all the adversities it faces after hitting the bottom with 796 billion dollars on December 20, 2022. The market value is at 1.18 trillion dollars, increasing by 0.90% in the last 24 hours as of the time this article was written.
