INSUBCONTINENT EXCLUSIVE:
BIS issued a series of warnings after rise in cryptocurrency drew a wave of followers.London: Cryptocurrencies are more likely to suffer a
breakdown in trust and efficiency the greater the number of people using them, the Bank of International Settlements (BIS) said on Sunday in
its latest warning about the rise of virtual currencies.For any form of money to work across large networks it requires trust in the
stability of its value and in its ability to scale efficiently, the BIS, an umbrella group for the world's central banks, said in its
annual report.But trust can disappear instantly because of the fragility of the decentralised networks on which cryptocurrencies depend, the
BIS said.Those networks are also prone to congestion the bigger they become, according to the BIS, which noted the high transaction fees of
the best-known digital currency, bitcoin, and the limited number of transactions per second they can handle."Trust can evaporate at any time
because of the fragility of the decentralised consensus through which transactions are recorded," the Switzerland-based group said in its
report."Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop
functioning, resulting in a complete loss of value."The BIS' head of research, Hyun Song Shin, said sovereign money had value because it had
users, but many people holding cryptocurrencies did so often purely for speculative purposes."Without users, it would simply be a worthless
That's true whether it's a piece of paper with a face on it, or a digital token," he said, comparing virtual coins to baseball cards or
Tamagotchi.The dependency of users on so-called miners to record and verify crypto transactions is also flawed, according to the BIS,
requiring vast and costly energy use.It has issued a series of warnings this year after an explosive rise in cryptocurrency values attracted
a wave of followers.Agustin Carstens, general manager of the BIS, has described bitcoin as "a combination of a bubble, a Ponzi scheme and an
environmental disaster".The BIS has told central banks to think hard about the potential risks before issuing their own cryptocurrencies.No
central bank has issued a digital currency, though the Riksbank in Sweden, where the use of cash has fallen, is studying a retail e-krona
for small payments.The BIS also said in its annual report that effective regulation of digital coins needed to be global, targeting both
edited by TheIndianSubcontinent staff and is auto-generated from a syndicated feed.)
