New BIS report Highlights Why Central Banks Fear Cryptocurrency
The Bank for International Settlements (BIS) has released a report on the cryptocurrency market with scathing criticisms of Bitcoin and coins like it, suggesting that they are no better than baseball cards: utterly without value if no one wants them. The report included a list of other shortcomings like the difficulty at which cryptocurrencies scale themselves, as well as the openings in the regulatory framework, which have been used to commit fraud and manipulation in the market.
BIS also made sure to point out the other consequences of using cryptocurrency including the strain on the environment that the mining of new bitcoin has created. A process that uses more energy in a year to run the bitcoin blockchain than used by the nation of Chile. While these are legitimate issues with the bitcoin system as it stands right now, one thing that the BIS included as a shortcoming of the system is the fact that it is decentralized, citing that fact as the main drawback to the cryptocurrency system.
Being the bank that operates between other central banks, it is no surprise that the BIS would want to do everything it can to paint bitcoin as an inefficient, dangerous, and worthless currency. A very telling piece of evidence for the tone of this report can be found in their biased explanation as to why the bitcoin blockchain is a threat to financial stability. Going as far as even suggesting that the bitcoin blockchain could threaten the Internet itself if it were to grow beyond a certain point. A baseless statement, which highlights either a serious lack of understanding or the naked desire to force cryptocurrency into submission.
“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded […] 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.”
First, the ‘fragility’ in a decentralized network only becomes an issue when it is forced to interact with a centralized network, creating a weak point in the system that bad actors can exploit, like cryptocurrency exchanges. There is also the fact that a decentralized ledger ensures that data is uploaded, recorded, and stored permanently on a blockchain at the time of their completion, which can never be altered. This makes that last statement about how decentralized systems call into question the ‘finality of individual payments’ a bit of non sequitur.
Like every other institution that has come out against the blockchain revolution, the BIS has shown its hand in trying so desperately to paint the cryptocurrency market in an unflattering light. The report also included how cryptocurrencies and blockchain systems do still show promise in other fields like small cross-border transactions and has all but relegated the technology to the small scale out of fear that it will threaten the position of centralized banking in the global economy.