Swiss-based BIS Says Cryptocurrency Can’t Replace Current Payment System

Bitcoin Could Break the Internet, BIS Says

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  • Bank for International Settlements (BIS) stated that Bitcoin and Altcoins all have flaws in their design.
  • BIS declared that Blockchain is not capable of handling the current payment system loads.

Switzerland: The Bank for International Settlements (BIS) released an article of 21 pages on Sunday 18th June 2018 where it stated that Bitcoin and other cryptocurrencies all suffer from “a range of shortcomings” that could hinder them from satisfying the high expectations that led to an increase in interest.

The Swiss-based BIS, which was launched about 88 years ago and functions as a central bank for other central banks, stated in the article that digital currencies are not stable, they consume lots of electrical power and are susceptible to excessive manipulation and fraudulent acts which all impede their ability to act as valid exchange mediums in the global economy. BIS further stated that the decentralized nature of digital currencies is actually a central flaw instead of being a key strength.

The report added an upsetting point that if the Bitcoin underlying technology – blockchain – is adopted by the national payment systems to handle digital retail transactions – decentralized ledger. Increase in transaction data would enlarge the sizes of so many ledgers, which would ultimately overwhelm everything – large servers down to individual smartphones. BIS said:

“The associated communication volumes could bring the Internet to a halt.”

The central bank further stated that due to its high electrical power consumption, “the quest for decentralized trust has quickly become an environmental disaster” due to its high electrical power consumption.

Recent data from MarketCoinPrice revealed that the value of the total cryptocurrency market has dropped by about 53% to $280 Bln. BIS, nevertheless, mentioned some few benefits that the distributed ledger technology – blockchain could offer to the world’s financial system. The central bank stated that with blockchain, making payments across borders would become more efficient. More so, trades and businesses that still depend on facsimiles and letters of credit would appreciate the improvements brought about by Blockchain.

However, the body institution declared that Bitcoin’s decentralized nature is an Achilles’ heel for Blockchain technology, claiming that running the world’s economy on a decentralized network is very risky. The report concluded:

“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.”

Do you think the Bank for International Settlements is right in its assertion? Tell us in the comment box.

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