Central banks concerned over cryptocurrency performance

Tuesday 19 June 2018 11:20 CET | News

The Bank of International Settlements (BIS) has warned that crypto are more likely to suffer a breakdown in trust, as the number of people using those increases.

Lack of trust and efficiency is a consequence of the fact that cryptocurrencies are not scalable. Firstly, for any form of money to work across large networks it requires trust in the stability of its value and in its ability to scale efficiently, the BIS said in its annual report, according to Reuters. However, trust can disappear instantly because of the fragility of the decentralized networks on which cryptocurrencies depend, the BIS said.

Secondly, those networks are also prone to congestion the bigger they become, according to the BIS, which noted the high transaction fees of Bitcoin, and the limited number of transactions per second they can handle.

Lastly, 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. Moreover, this aspect has issued a series of warnings after an explosive rise in cryptocurrency values attracted a wave of followers.

To sum up, the BIS has told central banks to think hard about the potential risks before issuing their own cryptocurrencies.

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Keywords: BIS, banks, cryptocurrency, crypto, Bitcoin, trust, volatility, transaction fee, miners, banks
Countries: World