The Bank of International Settlements unleashed a scathing criticism of cryptocurrency over the weekend, saying that it will never be mainstream for financial services.
According to a report in Bloomberg citing a 24-page article released Sunday (June 17), the Bank of International Settlements said bitcoin has a “range of shortcomings” that will prevent it and other cryptocurrencies from meeting the expectations that drove the price of bitcoin surging last year. It said that cryptocurrencies aren’t stable enough, take too much electricity and can be manipulated and suffer fraud, which prevents them from becoming mainstream. It pointed to the decentralized nature of cryptocurrency as a flaw instead of a strength, noted the Bloomberg report. It even warned that as the size of the distributed ledger increases, it could hurt everything from smartphones to servers. “The associated communication volumes could bring the Internet to a halt,” the report said, according to Bloomberg. “Put in the simplest terms, the quest for decentralized trust has quickly become an environmental disaster.”
While the report trashed cryptocurrencies, the Bank of International Settlements did note that blockchain technology provides benefits for the financial system on a global basis — given it can make sending cross-border payments faster — and trade finance is in need of the improvements that blockchain can facilitate, noted the report. Still, it argued that bitcoin is too risky for it to explode and be widely adopted. “Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded,” the report concluded, according to Bloomberg. “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.” The report comes as the cryptocurrencies market is facing increased scrutiny at the same time that some on Wall Street are embracing it. The report could spook investors further and thus send the price of bitcoin lower.