BIS Execs Reveal Flaws Preventing Mainstream Adoption Of Crypto

According to executives at the BIS (Bank of International Settlements), certain flaws prevent cryptocurrency’s widespread usage. The executives believe CBDCs can capitalize on these flaws and drive massive adoption.

Central Banks Should Copy The Good Qualities Of Crypto In CBDC Development

Governments globally see CBDCs (Central Bank Digital Currencies) as a way to improve their present monetary system. A recent publication from the IMF (International Monetary Fund) shows that central banks have attracted trust over the years.

The publication advised central banks to combine crypto’s technical advantage and bank trust. This combination would foster a rich financial system.

Meanwhile, the authors of the publication are executives at the BIS. They include Agustin Carstens (General Manager), Hyun Song Shin (Economic Adviser), and Jon Frost (Head of economics for the US).

An earlier study by the BIS in June noted that crypto outperforms fiat currencies. This performance is especially in relation to the future digital economy. 

“Unfortunately, recent developments have highlighted the failure of crypto to provide a monetary system that serves society,” the publication stated.

Also, the publication notes that these shortcomings are structural flaws and not bugs. As a result, the BIS executives believe the future monetary system should employ the technical capability of crypto and the trust of central banks.

Notably, the executives believe that fiat currency can handle all crypto transactions better. Hence, they advised central banks to consider the technical wizardry of crypto when designing CBDCs. 

BIS Execs List The Flaws Of Cryptocurrency

Meanwhile, the executives also highlighted some flaws preventing the widespread adoption of cryptocurrency. They include the crypto’s over-reliance on fluctuating assets, the congestion of DeFi due to crypto’s decentralized nature, and lack of anchor.

The report also highlighted the dependence of stablecoins on fiat currencies to maintain stability. This shows that crypto cannot survive with fiat currency.

Therefore, these flaws have reportedly made crypto inefficient and unstable. Also, the publication argued the sector is unregulated and unaccountable to society. 

Recently, the issue of frequent scams, fraud, and theft has raised concern over the integrity of the crypto sector. The report also highlighted the fall of Terra and its ripple effect in the crypto sector.

The report noted that retail and wholesale CBDCs have huge potential. They only have to adopt the technical qualities of cryptocurrency that will benefit users.

Furthermore, it advised central banks to adopt innovations like tokenization. This would foster payment using several fiat currencies, benefiting customers and merchants. 

The publication concluded by saying the safety of users should be at the forefront of innovation. Also, digital technologies have enormous potentials that can change the current monetary system.