crypto: Crypto is a ‘flawed system’ : Bank for International Settlements

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The Bank for International Settlements (BIS) said Tuesday that decentralized cryptocurrencies are a “flawed system” and instead backed the development of a centralized alternative.

The BIS, seen as the central bank of central banks, has backed the “tokenization” or conversion of money and other assets into digital tokens that can be traded on programmable platforms, saying it offers the promise of a “major leap” in the financial system.

Central banks and regulators have mostly been skeptical, if not downright hostile, to cryptocurrencies, which were developed using digital blockchains, a technology that enabled decentralized management of trading assets. Proponents of the technology have praised its decentralized structure and often anonymous transactions that have taken over government institutions like central banks.

But central banks have started testing the waters of the technology, with the BIS playing a leading role.

In an early release of its quarterly report, the BIS wholeheartedly embraced the underlying technology, but said its success in the financial sphere requires the confidence that comes from being backed by institutions such as banks. Discover the stories that interest you “Crypto and decentralized finance (DeFi) offered a glimpse of the promise of tokenization, but crypto is a flawed system that cannot take on the role of the future of money” The cryptocurrency system “lacks the anchor of trust in central bank-provided money…the implosion of the crypto universe over the past year,” the BIS said. shows that there is no substitute for reality,” he added.

Regardless of the stock’s enormous volatility, the crypto world has been repeatedly hit by scandals, including the collapse of exchange platform FTX last November, which saw investors lose huge sums.

Crypto platform crashes are forcing regulators to get tough to protect consumers, with U.S. authorities recently hitting two major exchanges for allegedly circumventing securities laws.

Although the BRI is pushing for a single transaction ledger, what may ultimately emerge is a web of interconnected variants.

The report examines several central bank studies, including Jura, a brainchild of the Swiss National Bank and the Banque de France to test cross-border operations using digitized versions of central bank issue currencies.

The BRI has called tokenization a “logical next step” in digital record keeping and asset transfer.

“Tokenization could dramatically improve the capabilities of the monetary and financial system by harnessing new ways for intermediaries to interact in service of end users, removing the traditional separation of messaging, reconciliation and settlement,” he said. -he declares.

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