Blockchain technology ‘not suitable for payments,’ says Bank for International Settlements’ Annual Report

The recent Bank for International Settlements report has stated that cryptocurrency’s backbone, blockchain, might not be “suitable for payment at all.” Referring to the market’s 2018 crypto-winter when prices fell to new lows, the report stated that regulatory action has a significant impact on digital assets’ valuation, transaction volume, and user base.

However, this is curious since the same BIS annual report for 2018/2019 hints at a new found interest in the cryptocurrency ecosystem.

During the year under review, the Financial Stability Institute (FSI) released five off-the-shelf tutorials that detailed the fundamentals of blockchain applications, blockchain structure and security, Bitcoin and blockchain, and cryptocurrencies and initial coin offerings (ICOs).

The report also acknowledged the entry of  “big tech” firms in large numbers such as Facebook’s Libra project. It claimed that this influx of crypto-participants raises alarming questions in terms of competition, financial inclusion, data protection, and financial stability. BIS’s report read,

“Big tech firms are more active lenders in countries with less competitive banking sectors and less stringent regulation, even more so than the wider financial technology [fintech] sector.”

On the contrary to the quotes above, BIS had previously suggested the need for “big techs” and traditional financial establishments to be on equal footing. One of the key takeaways stated in the document titled, “Big tech in finance: opportunities and risks” was,

“Regulators need to ensure a level playing field between big techs and banks, taking into account big techs’ wide customer base, access to information and broad-ranging business models.”

Facebook’s latest move also prompted the BIS Head, Agustín Carstens, to believe that digital assets and cryptocurrencies need to be taken more seriously. During a recent interview with FT, Carstens stated,

“Many central banks are working on it; we are working on it, supporting them. And it might be that it is sooner than we think that there is a market and we need to be able to provide central bank digital currencies.”