The Bank for International Settlement (BIS) recently issued its reservations about the increasing role of cryptocurrencies as a medium of exchange in the real world. Indeed, the cryptocurrencies like Bitcoin were originally introduced as a digital currency. However, the token was able to gain more traction among the users for its utility as a store of value and hedge against inflation.
Nevertheless, with time the use of cryptocurrencies as a mode of payment has been increasing in the world. There are also countries like El Salvador, Panama, and CAR that have adopted Bitcoin as a legal tender under their jurisdiction. Despite all the recent transitions, there is still a considerable amount of opposition against the adoption of cryptocurrencies as an alternative for paperback.
The latest bulletin issued by the BIS suggests that cryptocurrencies and blockchain technologies are financial technologies. The bulletin is titled Blockchain scalability and fragmentation of crypto. The report claims that cryptocurrencies lack the essential components to fit the role of the social placeholder for fiat currencies. The report also takes note of issues that are related to the wide adoption of cryptocurrencies.
The report by BIS analyst postulates that in the near term, cryptocurrencies can be broken down per their wide array of use cases. BIS experts also suggest the idea that several permission-less byproducts of blockchain, such as cryptocurrencies and DeFi tokens, seek to transform and replace the centralized monetary infrastructure.
Limitations of Cryptocurrencies
The General Secretary of BIS also issued a critical observation about the cryptocurrency market last year. Agustin Carstens argued that DeFi was an illusion while commenting on the breaking of the private financial intermediaries. The latest report by BIS suggests that cryptocurrencies have limited scalability and interoperability, which can be a major hindrance to mass adoption.
On account of the massive number of cryptocurrencies, the experts at BIS believe that a particular type of money gains more traction depending on the number of people using it as a medium of exchange. Therefore, there is little chance that in cryptocurrencies, people around the world are going to find common ground that would prevent the crypto markets from taking over the role of fiat currencies in society.