A global bank association that provides information to central banks has savaged those who believe that cryptocurrencies are the future of the financial world.
The Bank for International Settlements (BIS), founded in 1930, has issued a report that questions whether the new products have any future at all.
According to the BIS evaluation:
Cryptocurrencies promise to replace trusted institutions with distributed ledger technology. Yet, looking beyond the hype, it is hard to identify a specific economic problem which they currently solve. Transactions are slow and costly, prone to congestion, and cannot scale with demand. The decentralised consensus behind the technology is also fragile and consumes vast amounts of energy. Still, distributed ledger technology could have promise in other applications. Policy responses need to prevent abuses while allowing further experimentation.
The role of “real money” will persist while the upstart of the currency world has already lost its future. The evaluation is in contrast to that of experts who believe the new form of electronic payments will make money-based transactions obsolete. Trading in cryptocurrencies has produced violent swings recently, with bitcoin losing over half its value, so the BIS view has some support from recent events.
The BIS research also produced a side comment, almost lost in its study:
A thought experiment illustrates the inadequacy of cryptocurrencies as an everyday means of payment. To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months. But the issue goes well beyond storage capacity, and extends to processing capacity: only supercomputers could keep up with verification of the incoming transactions. The associated communication volumes could bring the internet to a halt, as millions of users exchanged files on the order of magnitude of a terabyte.
However, since the BIS says cryptocurrencies will never attain full-blown currency status, the comment about the internet is gratuitous.
Suffice it to say that the BIS is among the most respected organizations in the global financial world. In the debate about cryptocurrencies, its judgment is that they have no future.
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