For the BIS, Bitcoin has severe structural limitations that prevent them from achieving efficiency, stability, and integrity. They allege that decentralized cryptocurrencies facilitate illicit activities despite studies showing that hackers prefer fiat currencies.
The collapse of Terra and the Bitcoin (BTC) bearish market has led regulators to criticize the ecosystem more than ever before. An example of that situation is the new report from the Bank for International Settlements (BIS).
According to the above international financial institution, decentralized cryptocurrencies and DeFi have severe structural limitations. They say this prevents them from achieving efficiency, stability and integrity as an adequate monetary system.
The BIS further suggests that decentralized cryptocurrencies lack a nominal anchor, which they try to import, imperfectly, through stablecoins. They argue that central bank digital currencies (CBDC) offer a more stable solution for a future monetary system.
The financial institution thinks that CBDCs allow central banks to be in a position to provide the core of the financial system. They believe the private sector can adopt those currencies for their programmability, composability, and tokenization.
The report indicates that 90% of recently surveyed central banks are working on their CBDCs. The study is in line with the promise by the BIS to promote the use of CBDCs for 2022.
The bank stated the Innovation Hub, seeking to identify trends in financial technologies relevant to central banks, would also launch CBDC projects. In addition, they plan to establish next-generation payment systems and DeFi.
It Is Necessary to Close Exchanges Not Meeting Some Standards
The BIS also criticized platforms offering services with Bitcoin and other cryptocurrencies, specifically those hiding the identity of users.
They also suggest fining or closing those not complying with the know-your-customer (KYC) rule and the Financial Action Task Force (FATF) requirements.
The financial institution insists that decentralized cryptocurrencies facilitate money laundering, tax evasion, and terrorism financing. However, various studies have shown that hackers prefer to launder money with fiat currencies and altcoins rather than with Bitcoin.
Cybercriminals have laundered over USD 33 billion worth of cryptocurrencies since 2017, moving much through centralized exchanges. According to UN data, they launder between USD 800 billion and USD 2 trillion in fiat currencies, about 5% of the world GDP.
The BIS Acknowledges that Cryptocurrencies Have Technological Possibilities
According to the BIS, cryptocurrencies offer promising technological possibilities but do not meet the high-level objectives of a digital monetary system.
The bank believes that CBDCs and new digital technologies must support the future of the financial system.
Their report seems to attack Bitcoin and other cryptocurrencies due to the unavoidable interest it arouses among retail and institutional investors.
In May, they talked about the impact of the exponential expansion of the Bitcoin industry on the financial sector, particularly banks.
Bitcoin is trading at around USD 20,107 and has accumulated a 3.7% loss over the last 24 hours. While its daily trading volume is above USD 25.22 billion, its market capitalization is about USD 383.54 billion, according to CoinGecko.
By Alexander Salazar