This Is What The Bank For International Settlements Thinks About BitcoinThe Bank for International Settlements (BIS) released a 24-page publication on Sunday, through which it pointed out that Bitcoin has had some major faults that have prevented it from reaching expected heights.
The 24-page article pointed out that Bitcoin which is the most popular cryptocurrency might never go mainstream as far as financial services are concerned. It also pointed out that the shortcomings surrounding the digital coin will most likely hinder it from ever fulfilling the promises that caused it to gain so much interest. The BIS is based in Switzerland and is considered the central bank for other central banks.
The BIS noted in its quarterly review: “What makes currencies credible is trust in the issuing institution, and successful central banks have a proven record of earning this public trust. The short experience of cryptocurrencies shows that technology, however sophisticated, is a poor substitute for hard-earned trust in sound institutions. “
The report pointed out some well-known issues such as fraud, heavy manipulation, and the fact that Bitcoin mining consumes too much electricity as some of the limiting factors of the cryptocurrency. The BIS also claims that the decentralized nature of cryptocurrencies is one of the major drawbacks of cryptocurrencies despite it being widely thought to be advantageous. The statement, however, aligns with thoughts from major financial institutions that the lack of central control over currency would be disastrous.
The technology might eventually fail and bring the internet to a halt
According to the BIS report, researchers went to work to find out what it would take for the blockchain software handling Bitcoin transactions to process the digital transactions currently handled by national payment systems. The researchers found that the ledgers would eventually swell up and overwhelm the servers and any other devices used to handle them. This could bring the internet to a standstill, thus causing a disaster.
The researchers also claim that Bitcoin miners consume as much electricity as Switzerland and as such, crypto mining is brewing into an environmental disaster. The report by the BIS comes at a time when Wall Street has been opening up to the cryptocurrency market. The New York Stock Exchange, Goldman Sachs, and other institutions have been working on new products that would provide customers with access to the cryptocurrency market.
The U.S Securities and Exchange Commission (SEC) has been working on making sure that the issuance of digital tokens is carried out in a legal manner. This is because fraudsters have been using initial coin offerings (ICOs) as opportunities to steal millions. The first half of 2018 has proved to be quite tough for the cryptocurrency market because it lost most of the gains that were reported towards the end of 2018.
Despite the rather negative report against cryptocurrencies and blockchain technology, the BIS also had a few positive sentiments. The institution claims that decentralized ledger technology may be useful to the global financial system in terms of simplifying cross-border payments, making payments more efficient. The decentralized nature is also ideal because it has trust built into the system. However, if blockchain technology stops functioning, it could lead to the loss of value.