BIS to Issue Report on Cryptos and Blockchain

In new report Bank of International Settlements questions crypto's ability to deliver promises
18 June 2018   791

The Bank for International Settlements, whose main functions are facilitating cooperation between central banks and facilitating international financial settlements, published material that questioned the ability of the cryptocurrency to justify the expectations placed on them. This is reported by CoinDesk.

In the document under the heading "Cryptocurrencies: looking beyond the hype", the history of technology and analysis of its potential as a trustworthy form of money are given. The publication of this document precedes the release of the full annual economic report of the BIS.

The decentralized technology of cryptocurrencies, however sophisticated, is a poor substitute for the solid institutional backing of money.To process the number of digital retail transactions currently handled by selected national retail payment systems, even under optimistic assumptions, the size of the ledger would swell well beyond the storage capacity of a typical smartphone in a matter of days, beyond that of a typical personal computer in a matter of weeks and beyond that of servers in a matter of months.
 

Cryptocurrencies: looking beyond the hype

As reported, beyond storage capacity, the report claims that "only supercomputers" have the proper processing power needed to conduct every retail transaction on a blockchain, and even if there were sufficient supercomputers to create a decentralized network, "millions of users [would] exchange files on the order of a magnitude of a terabyte." Bank claims that using a blockchain to process the volume of retail payments made daily "could bring the internet to a halt." 

The document also mentions the miners with which, according to its authors, a number of assumptions are connected: it is assumed that honest miners control most of the computing power of the network, and the issue of coins occurs in accordance with the pre-established rules of the protocol.

Although the BIS is negative about the cryptocurrency, the blockchain technology finds a positive response in its report, as it looks "promising in other areas." A distributed ledger can be used for cross-border payments, "where the benefits of decentralized access exceed the higher operating cost of maintaining multiple copies of the ledger."

US Federal Reserve to Consider Digital USD Issue

If a some country or company issues digital money that is widely recognized, this could lead to the loss its status by the USD, fed official believes
17 October 2019   66

The US Federal Reserve is actively considering the possibility of issuing digital currency, fearing the dollar will lose its leading position in the global financial system. This was stated by President of the Federal Reserve Bank of Dallas Rob Kaplan, reports CoinDesk.

In his opinion, if a foreign government or company issues digital money that is widely recognized, this could lead to the loss of the status of the world's reserve currency by the dollar.

On the eve of the previous chairman of the Commodity Futures Trading Commission (CFTC), Christopher Giancarlo also expressed concern that the re-issuance by other countries of national currencies in digital form could lead to the dollar losing its dominant role in the world. He called for the release of a digital dollar on the blockchain.

Bank of England Governor Mark Carney said earlier that a digital currency like Facebook’s Libra can replace the dollar as a global reserve currency.

The emergence of an attractive and viable alternative to the dollar will reduce demand for US government securities, Kaplan said. This will lead to an increase in interest rates by 100 basis points (1%), which will increase the cost of servicing public debt by $ 200 billion per year.

I still think for the foreseeable future, the dollar will be the world reserve currency, we’re able to refinance our debt at relatively low rates, but I don’t think we should take that for granted.
 

Rob Kaplan

President, Federal Reserve Bank of Dallas

Kaplan noted that countries subjected to sanctions or increased trade tariffs by the United States are working most actively on the digital alternative to the dollar.