The Bank for International Settlements (BIS) has told the
Group of Twenty (G20), the intergovernmental forum comprising the world’s top
19 economies, and the European Union, that cryptocurrencies cannot be adopted
as a monetary instrument because they have “inherent structural flaws.”
In a report submitted to
the G20 Finance Ministers and the Central Bank Governors, the BIS stated in
detail the flaws facing digital assets, among them instability and
inefficiency. The BIS, which brings together the world’s major central banks, added
that there is a lack of accountability in the cryptocurrency ecosystem.
“Crypto has so far failed to harness innovation to
the benefit of society,” the BIS stated. “Crypto does not finance
any real economic activity. Additionally, it suffers inherent shortcomings
related to stability and efficiency, as well as accountability and integrity.”
Conversely, in the
report, the BIS acknowledged that cryptocurrencies had an element of genuine
innovation like programmability, which enables the automation of transactions
and integration into other systems. According to international financial
institution, such aspects, when combined with asset tokenization , can reduce transaction costs.
However, the BIS is
faulting cryptocurrency projects for exacerbating the flaws in traditional
financial systems. The BIS particularly cited Decentralized Finance (DeFi), a financial system that uses blockchain technology to offer services such as
lending, investing, and trading of financial instruments.
BIS’ Concerns about
Stablecoins
The BIS cited the collapse of the cryptocurrency exchange
FTX as an example of the vulnerability of the digital asset space. Besides
that, the institution pointed out some of the challenges facing the stablecoin
sector in light of last year’s collapse of the
Terra USD project.
“Stablecoins are
subject to a conflict of interest whereby the issuers are incentivized to
invest in risky assets,” the BIS explained. “The stability of
stablecoins, therefore, depends on the quality and the transparency of their
asset reserves, which often lacks.”
The skepticism the
central bankers expressed concerning digital assets is nothing new in light of
their push for central
bank digital currencies (CBDCs), the digital alternatives to fiat currency. CBDCs are expected to transform how
users interact with financial systems.
Finance Magnates
reported in June that the International Monetary Fund (IMF) was working
on a global infrastructure for
the CBDCs. The project aims to ensure interconnectedness in payment
settlements, IMF’s Managing Director, Kristalina Georgieva, said.
Spotware appoints new CEO; XS.com welcomes Marketing Manager; read today’s news nuggets.
The Bank for International Settlements (BIS) has told the
Group of Twenty (G20), the intergovernmental forum comprising the world’s top
19 economies, and the European Union, that cryptocurrencies cannot be adopted
as a monetary instrument because they have “inherent structural flaws.”
In a report submitted to
the G20 Finance Ministers and the Central Bank Governors, the BIS stated in
detail the flaws facing digital assets, among them instability and
inefficiency. The BIS, which brings together the world’s major central banks, added
that there is a lack of accountability in the cryptocurrency ecosystem.
“Crypto has so far failed to harness innovation to
the benefit of society,” the BIS stated. “Crypto does not finance
any real economic activity. Additionally, it suffers inherent shortcomings
related to stability and efficiency, as well as accountability and integrity.”
Conversely, in the
report, the BIS acknowledged that cryptocurrencies had an element of genuine
innovation like programmability, which enables the automation of transactions
and integration into other systems. According to international financial
institution, such aspects, when combined with asset tokenization , can reduce transaction costs.
However, the BIS is
faulting cryptocurrency projects for exacerbating the flaws in traditional
financial systems. The BIS particularly cited Decentralized Finance (DeFi), a financial system that uses blockchain technology to offer services such as
lending, investing, and trading of financial instruments.
BIS’ Concerns about
Stablecoins
The BIS cited the collapse of the cryptocurrency exchange
FTX as an example of the vulnerability of the digital asset space. Besides
that, the institution pointed out some of the challenges facing the stablecoin
sector in light of last year’s collapse of the
Terra USD project.
“Stablecoins are
subject to a conflict of interest whereby the issuers are incentivized to
invest in risky assets,” the BIS explained. “The stability of
stablecoins, therefore, depends on the quality and the transparency of their
asset reserves, which often lacks.”
The skepticism the
central bankers expressed concerning digital assets is nothing new in light of
their push for central
bank digital currencies (CBDCs), the digital alternatives to fiat currency. CBDCs are expected to transform how
users interact with financial systems.
Finance Magnates
reported in June that the International Monetary Fund (IMF) was working
on a global infrastructure for
the CBDCs. The project aims to ensure interconnectedness in payment
settlements, IMF’s Managing Director, Kristalina Georgieva, said.
Spotware appoints new CEO; XS.com welcomes Marketing Manager; read today’s news nuggets.