- Bitcoin is a speculative asset that is used for crime and is bad for the planet, the BIS has said.
- The international organization said bitcoin has “few redeeming public-interest attributes.”
- Regulators and central banks are paying increasing attention to bitcoin and cryptocurrencies.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Crypto tokens such as bitcoin are speculative assets rather than currencies, are often used for crimes such as money laundering, and waste energy, the Bank for International Settlements has said.
Bitcoin “has few redeeming public interest attributes,” the BIS said on Wednesday, in a chapter of its annual economic report. The BIS is an international organization that acts as a central bank for central banks and aims to foster global financial cooperation.
“By now, it is clear that cryptocurrencies are speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes.”
The report continued: “Bitcoin in particular has few redeeming public interest attributes when also considering its wasteful energy footprint.”
Research by Cambridge University has found the bitcoin network – which is secured by vast amounts of computing power – uses around the same amount of energy each year as the Netherlands.
Regulators and central banks are paying more and more attention to cryptocurrencies, which they broadly see as dangerously volatile. Earlier in June, a top banking regulator, based at the BIS, advocated for the toughest possible rules for banks holding crypto.
Wednesday’s BIS report looked at the case for central bank digital currencies, and also took aim at stablecoins and the growing dominance of a select few tech firms over digital payments.
“Innovations such as cryptocurrencies, stablecoins and the walled garden ecosystems of big techs all tend to work against the public good element that underpins the payment system,” it said.
The report said stablecoins – crypto tokens that are backed by reserve assets – “have the potential to fragment the liquidity of the monetary system.” But it said their reliance on traditional assets means they’re “not a game changer.”
The BIS said the growing dominance of a few tech firms is perhaps the biggest danger to the safety and smooth functioning of global payment systems. It said the firms’ rising market power could keep costs high, cause data protection issues, and freeze some people out.
Central banks are increasingly working on their own digital currencies. Although these projects have coincided with the crypto boom, central bankers say they are more concerned about private payment systems becoming too big to fail.
Huw van Steenis, chief advisor to the CEO of Swiss bank UBS, told Insider in May: “If you think about the pandemic, it’s probably fast-forwarded the shift away from cash to digital by about three to five years.”
He added: “No central banker ever wants to feel they might lose control of their currency.”