Central bankers recently made a case against cryptocurrencies taking on the role of money, highlighting what they believe to be “inherent structural flaws.”
The Bank for International Settlements particularly focused on constant hacks and a wave of collapses that struck numerous companies in 2022.
Crypto is a better option than anything the banks can offer
The crypto industry has proven itself as a better, more advanced version of money time and time again.
Blockchain is faster, cheaper to use, and less limited than modern banking systems. Cryptocurrencies are resistant to inflation and centralized control, and payments can be made globally within seconds.
Even when one uses Bitcoin, arguably the slowest crypto, which takes 10 minutes to process a payment, that is still far superior to banking systems that take days to process an international transaction.
All of these advantages make cryptocurrencies the logical next step in the evolution of the financial industry, but their resistance to control by central banks and governments is what makes these institutions quite unwilling to allow digital assets to advance.
Banks are now trying to convince the world that cryptocurrencies are unreliable, and the Bank for International Settlements wrote a report saying why cryptos would be unsuitable as monetary tools.
Crypto offers innovation, but it is not worth the risk, says BIS
According to the BIS report, crypto suffers from issues like instability, inefficiency, and accountability. While the collective of the world’s major central banks admits that digital assets offer innovative benefits, they also claim that the benefits are not worth the risk.
The report said that, despite the millions of retail and institutional investors who got involved in the emerging sector, crypto has failed to harness innovation to benefit society. The report was prepared for the meeting of G20 central bank governors and finance ministers, which will take place this weekend in Gandhinagar, India.
The report says, “Crypto remains largely self-referential and does not finance real economic activity. Inherent structural flaws make it unsuitable to play a significant role in the monetary system.”
It is true that the crypto industry had a turbulent year, and it suffered some heavy losses. The bear part of the cycle took over in November 2021 and lasted until 2023. Meanwhile, 2022 took the worst of it, which caused the collapse of the Terra blockchain, followed by the bankruptcy of the FTX exchange and its closest partners.
At the same time, hacks, scams, rug pulls, and similar issues have caused the loss of billions of dollars to bad actors. All of these problems are holding the industry back from growing into a full-on payment system that society wants and needs.
Central banks will continue to oppose crypto
Of course, it could be argued that the lack of regulation allowed for mismanagement of customer assets by certain crypto companies, and their actions were what led to their demise. However, central banks seem content with blaming the effects of the problem without trying to address the problem itself.
Their skepticism is nothing new, especially since crypto adoption will lead to a disruption of their businesses and displacement of traditional currencies. It remains clear that they intend to fight the crypto sector’s advancement at every turn in order to stay in control.
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