In brief
- The Bank for International Settlements has taken aim at Bitcoin and the wider world of crypto.
- In an annual report, the bank said Bitcoin has few redeeming public interest attributes.
The Bank for International Settlements (BIS) has slammed Bitcoin in its Annual Economic Report, suggesting that the cryptocurrency has very few things going for it.
In a chapter from the report released ahead of its full publication on June 29, the BIS argued that cryptocurrencies are “speculative assets rather than money,” singling them out for their role in facilitating “money laundering, ransomware attacks, and other financial crimes.”
In addition, the BIS singled out Bitcoin for its high energy consumption—which previous reports have found to be higher than the annual energy consumption of some countries. “Bitcoin, in particular, has few redeeming public interest attributes when also considering its wasteful energy footprint,” the report said.
As well as dismissing traditional cryptocurrencies like Bitcoin, the report took aim at stablecoins—crypto assets such as Tether, which claim to be backed by fiat currencies.
Stablecoins “attempt to import credibility by being backed by real currencies,” the report said, adding that, “these are only as good as the governance behind the promise of the backing.”
Tether, the crypto industry’s largest stablecoin by far, revealed its reserves in May for the first time since 2014. After claiming Tethers were 100% backed by cash, it turned out that less than 3% of Tether’s reserves were held in cash.
Wider context
The BIS report comes just weeks after the bank assumed a tough stance against banks seeking to hold crypto assets.
Banks Must Cover Bitcoin Holdings With Own Capital: Regulators
Banks must set aside sufficient capital to cover any losses they may suffer as a result of Bitcoin holdings in full, according to The Basel Committee on Banking Supervision, a committee comprised of regulators from around the world. The move has been described as "conservative" and threatens to prevent the widespread institutional adoption of Bitcoin. The news follows El Salvador's move to adopt Bitcoin as legal tender, despite concerns regarding the cryptocurrency's volatile price. Basel rules...
On June 10, the BIS released a consultation paper that said the continued growth of crypto could increase the risk of financial instability. As a result, the bank imposed a rule compelling banks to set aside sufficient capital to cover any losses they may suffer as a result of holding Bitcoin.
At the time, the move was described as conservative, and one that threatens to sidetrack hopes for the widespread adoption of Bitcoin.
