BIS: Trust is the missing link in today’s cryptocurrencies
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BIS: Trust is the missing link in today’s cryptocurrencies 21 June 2018Switzerland Reporter: Maddie Saghir
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Cryptocurrencies’ model of generating trust has limited their potential to replace conventional money, according to the annual economic report by the Bank for International Settlements (BIS).
BIS argued that the decentralised technology, which underpins private digital tokens, is not a substitute for tried and trusted central banks.
According to BIS, today’s cryptocurrencies are more cumbersome to use due to the increased number of users in contrast with conventional money, which works better the more people use it and trust it.
Commenting on macroprudential frameworks, BIS reported that authorities have made substantial progress since the 2008 financial crisis in tackling system-wide financial stability risks and in deploying a broad range of tools.
BIS said although the measures have focused on banks, they still need to be extended to other financial players, including asset managers.
Macroprudential frameworks strengthen the financial system’s resilience, however, they have not single-handedly prevented dangerous financial booms, BIS explained.
Commenting on cryptocurrencies, Hyun Song Shin, economic adviser and head of research at BIS, said: “Money has value because it has users. Without users, it would simply be a useless token. That's true whether it's a piece of paper with a face on it or a digital token."
In regards to the macroprudential frameworks, Claudio Borio, head of monetary and economic department at BIS, commented: "It is important to embed macroprudential measures into a broader, more holistic macro-financial stability framework. That framework includes not only prudential measures but also monetary, fiscal and even structural policies."
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