Bank of International Settlements report says fiat money will not be replaced by digital and that cryptocurrencies become more inefficient as they grow.
Bank of International Settlements (BIS) has voiced its opinion that as cryptocurrencies get bigger the less efficient they become. Breakdown in trust and lower efficiency have been singled out in the report as key issues.
“Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded”
BIS also noted that the big networks are prone to congestion, singling out bitcoin for having high purchase fees and a limited amount of transactions that the system can process.
"Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value."
A Switzerland based organisation also said that the digital currencies are not flexible enough to become a key element in a payment system since they cannot adjust to factors such as the economic growth. Head of research for BIS Hyun Song Shin also weighed in on the issue, saying that the value of fiat currencies is supported through their everyday use while cryptocurrencies are mostly being used as a speculative tool.
Therefore, BIS says that cryptocurrencies would not be in a position to replace traditional money. Report also suggests digital coins regulation should be conducted at a global level, overlooking private companies and financial institutions.
However, the financial institution has also admitted that crypto technology does have its benefits, especially when it comes to cross - border transactions. It also doesn't rule out that central banks around the world could launch their own cryptocurrencies.