Bitcoin Doesn't Work as Money, BIS Says in Damning Report

BIS Says Bitcoin Unstable Has Design Flaws High Energy Costs & Fraud Problems

BIS Says Bitcoin Unstable, Has Design Flaws, High Energy Costs & Fraud Problems

This is based on the bank's calculation of what would be required if the digital currencies were called upon to carry out all the digital transactions now made by national systems.

The Bank for International Settlements (BIS) believes that cryptocurrencies are not yet ready to come to the forefront for logistical reasons because they do not yet have the characteristics to be a reliable means of payment. "The associated communication volumes could bring the internet to a halt", the report wrote. Shin says that network congestion will mean very long transaction times and very high transaction fees, hence limiting the usefulness of cryptocurrencies that have the same scalability issues as Bitcoin for everyday transactions such as a paying for a coffee.

"Transactions have at times remained in a queue for several hours, interrupting the payment process".

The report noted that regulatory challenges also need to be addressed with respect to cryptocurrencies, such as anti-money laundering and terrorism financing.

The dependency of users on so-called miners to record and verify crypto transactions is also flawed, according to the BIS, requiring vast and costly energy use.

Also, read: Can Bitcoin Make a New High?

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As per a report by Coindesk, the thought that "many cryptocurrencies are ultimately get-rich-quick schemes." would be the prime focus of this upcoming report.

The bank also revealed that there are chances for the central bank to launch digital currencies, which several central banks are contemplating.

The assessment was made in a 24-page report Sunday by Switzerland's Bank for International Settlements, an agency considered a central bank for central banks. When this decentralized anonymous system was introduced in 2009, it quickly proved it could secure purchases by computer enthusiasts, networks of friends, as well as criminals in the digital black market, says a working paper published by the National Bureau of Economic Research, a non-profit organization in Cambridge, Massachusetts.

Although, BIS is not totally discounting the usefulness of distributed ledgers. Even as Goldman Sachs Group Inc., the New York Stock Exchange, and other institutions take steps to offer clients access to the new marketplace, the U.S. Securities and Exchange Commission is cracking down on the offerings of new digital tokens, which it has found are rife with ripoffs.

In the section "Beyond the bubble: making use of distributed ledger technology" of the report, the BIS clearly recognizes the blockchain technology.

One example BIS suggested is low-volume cross-border payment services. The report basically concludes that cryptocurrency is doomed to failure in its current form in terms of scaling.

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