Switzerland-based Bank for International Settlements (BIS), said the “intense interest” in bitcoin and other cryptocurrencies had prompted it to look “beyond the hype” at what use they could actually contribute to the economy.
The report’s authors were unimpressed, detailing a range of problems with trying to adopt digital currencies as a widely used form of money. They include the danger that just processing all the payments “could bring the internet to a halt,” said the report, which was published yesterday.
The Bank for International Settlements pointed out other concerns about using digital currencies as regular money, including the volatility of their prices. Bitcoin’s price surged to around $19,000 late last year but has since plunged to below $7,000.
Every bitcoin transaction also requires users to pay a fee to have it added to the digital ledger. In times of high demand, the fees go up. During the feverish trading of bitcoin in December, they spiked to around $57 per transaction.
“Just imagine, if you bought a $2 coffee with bitcoin, you would have had to pay $57 to make that transaction go through,” Hyun Song Shin, the bank’s head of research, said in a video accompanying the report.
“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded,” it said, adding that “means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”
