• The Bank for International Settlements (BIS) stated that crypto is a “flawed system” and cannot become the “future of money.”
• Stablecoins are trying to fill the “vacuum” of trust in the industry, but they are not a substitute for central bank money.
• BIS highlighted tokenization’s promise, and said that it could underpin future financial systems.
Crypto is „Flawed System“ According to BIS
The Bank for International Settlements (BIS) recently published its 2023 Annual Economic Report which stated that crypto is a „flawed system“ and cannot become the „future of money.“ Crypto inherently lacks trust which only central banks can provide, according to the report.
Stablecoins Attempting To Fill The Vacuum Of Trust
Stablecoins are attempting to fill this vacuum of trust in the industry, but they are no substitute for true central bank money, according to BIS. High-profile scandals in the industry have caused recent implosions of some coins‘ prices.
Despite this assessment, BIS also highlighted tokenization’s promise and said that it could underpin future financial systems. They believe tokenization is an important step forward towards creating more efficient payment networks across borders and currencies.
Central Banks Developing CBDCs
In response to these developments, many Central Banks have begun exploring ways to develop their own digital currencies – Central Bank Digital Currencies (CBDCs). These would be able to provide a similar level of trust as traditional paper money while still offering the advantages of faster payments and lower transaction fees associated with digital assets.
Overall, BIS believes that although crypto cannot replace traditional paper money as the future of currency, tokenization has great potential as an important step forward towards creating more efficient payment networks across borders and currencies. Central banks will need to continue developing CBDCs if they want to remain competitive in this growing space.