Bitcoin and the aggregated crypto markets have been able to massively increase their value within the last twelve months, El Salvador is making Bitcoin the legal tender, other countries want to follow. Still, the Bank for International Settlements BIS says in its latest annual report: crypto is not money – and crypto has no real value.
Old prejudices without foundation
Background BIS: The Bank for International Settlements (BIS) is an international financial organization. Only central banks or similar institutions can become members. The BIS currently has 60 members – including the US Federal Reserve System, the People’s Bank of China, the Bank of Japan, the Deutsche Bundesbank and the central banks of many other major economies. In short: The BIS brings together virtually everything that constitutes traditional finance. So everything that is NOT Bitcoin. Little wonder, then, that the bank does not leave a good hair on Bitcoin (to buy from Libertex or eToro) and Co.in its report.
After all, as the bank’s analysts write, crypto is not money, but a speculative asset. Especially one that carries no real value. In general, the report emphasizes that cryptocurrencies would not bring benefits to the public good.
“It is now clear that cryptocurrencies are speculative assets rather than money. And in many cases, they are used to facilitate money laundering, ransomware attacks and other financial crimes.“
So once again, a bank is citing an old crypto bias to back up its argument. Sure, Bitcoin is also used by criminals. However, the most used means of payment for criminal activities is still cash. However, you rarely hear how banks position themselves against cash.
The report continues:
“Bitcoin, in particular, has few redeeming attributes to the public interest, especially considering its wasteful energy footprint.“
The BIS has published the annual Report since 1931. In addition to an overview of the Bank’s activities and the annual financial statements, the document always includes a review of global economic and financial developments as well as a commentary on the most important issues facing economic and financial policymakers worldwide. Since 2018, the BIS has published its Annual Report (which includes: BIS activities and financial results) and the Annual Economic Report (Commentary on the World Economy) as separate documents.
Stablecoins “no game changer”
Stablecoins also criticizes the bank. Stablecoins, the report said, would try to “import credibility” by being backed by real currencies. As such, however, they are only as good as the governance behind the “promise of backing”. They would also have the potential to fragment the liquidity of the monetary system and affect the role of money as a coordination tool. The bank’s experts:
“In any case, when it comes to conventional money, stablecoins are ultimately just an appendage to the conventional money system and not a game changer.“
What this game changer could be, the report also talks about: according to the BIS, it is CBDCs (Central Bank Digital Currency) – i.e. digital central bank currencies. According to the report, the basis of any monetary system is confidence in the currency. CBDCs are therefore good. Because they would offer confidence that is ” based on confidence in the central bank itself.” It remains to be seen whether this confidence in central banks is actually as high as assumed. After all, many people value Bitcoin precisely because it is not associated with any bank or government.
You can read the full BIZ report here.