Bank for International Settlements Rejects Crypto as Money in Report to G20
A new report from the Bank for International Settlements (BIS) has pointed to “inherent structural flaws” in crypto as the reason why it will never become money.
In the report, the BIS made it clear that it believes crypto has problems related to its “stability and efficiency,” while also mentioning a lack of accountability and integrity as inherent flaws with crypto.
The report, titled “The crypto ecosystem: key elements and risks,” was prepared for a meeting of finance ministers in the G20, a group of the 20 largest economies in the world.
A report for the #G20 reviews the key elements of the crypto ecosystem and assesses structural flaws, risks and data gaps #G20India https://t.co/AXSbvoWAzs pic.twitter.com/iSnoizkIbA
— Bank for International Settlements (@BIS_org) July 11, 2023
Crypto’s rise
Despite doing its best to downplay the role that Bitcoin (BTC) or any other cryptocurrencies can play in the monetary system, the BIS report did acknowledge crypto’s rise from a “niche activity to something that impinges on the mainstream financial system.”
“While initially it was the preserve of a small set of enthusiasts, millions of retail users as well as more and more institutional investors have entered the crypto ecosystem in recent years,” the report said.
‘Elements of genuine innovation’
Further, the report’s authors admitted that “some elements of genuine innovation” exist in crypto, including “programmability” of money.
These innovations have the potential to offer new functionalities to money including ways to automate and seamlessly integrate sequences of financial transactions, the report said.
The programmability concept is something the BIS appears to have found a particular interest in, and the same concept was also mentioned in a BIS report on unified central bank digital currencies (CBDCs) unveiled by the bank last month.
But although the report recognized programmability and other innovations as “genuine,” it also said that crypto, so far, has “failed to harness innovation to the benefit of society.”
“Crypto remains largely self-referential and does not finance real economic activity,” it added.
Altogether, this means that crypto is “unsuitable to play a significant role” as money in the world, the BIS report concluded.
