Bank for International Settlements (BIS) has firmly rejected the notion of cryptocurrencies being considered as money. The report serves as a crucial milestone in the ongoing global discussion surrounding the classification and regulation of digital assets.
The BIS, often referred to as the “central bank of central banks,” conducted an in-depth analysis of cryptocurrencies and their potential implications for the global financial system. The report concludes that cryptocurrencies, including Bitcoin and others, do not meet the fundamental characteristics required to be recognized as money.
According to the report, for an asset to be considered as money, it must fulfill three core functions: acting as a unit of account, a medium of exchange, and a store of value. The BIS argues that cryptocurrencies fall short in meeting these criteria due to their volatility, limited acceptance as a means of payment, and lack of intrinsic value.
The report further highlights concerns related to financial stability, consumer protection, and the potential for illicit activities associated with cryptocurrencies. It underscores the need for robust regulatory frameworks to address these challenges effectively.
While acknowledging the potential benefits of blockchain technology, the BIS emphasizes the importance of distinguishing between cryptocurrencies and the underlying technology. The report calls for policymakers and regulators to focus on fostering innovation in areas such as central bank digital currencies (CBDCs) and distributed ledger technology (DLT), while appropriately addressing the risks posed by cryptocurrencies.
The BIS’s rejection of cryptocurrencies as money aligns with the cautious approach taken by many global financial authorities. Governments and regulatory bodies have been grappling with how to classify and regulate digital assets effectively, seeking to strike a balance between fostering innovation and safeguarding financial stability.
The report’s submission to the G20 is expected to prompt further discussions among member countries regarding the appropriate regulatory frameworks for cryptocurrencies. It also adds to the growing body of research and analysis that will inform future policies in addressing the challenges and opportunities presented by digital assets.
