Bank of International Settlements shoots a withering look at bitcoin and peers

London — The Bank for International Settlements (BIS) just told the cryptocurrency world it is not ready for prime time — and as far as mainstream financial services go, may never be.

In a withering 24-page article released Sunday as part of its annual economic report, the bank said Bitcoin and its ilk suffered from “a range of shortcomings” that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest — and investment — in the would-be asset class.

The bank, an 88-year-old institution in Basel, Switzerland, that serves as a central bank for other central banks, said cryptocurrencies were too unstable, consumed too much electricity, and were subject to too much manipulation and fraud to ever serve as bona fide mediums of exchange in the global economy. It cited the decentralised nature of cryptocurrencies — bitcoin and its imitators are created, transacted, and accounted for on a distributed network of computers — as a fundamental flaw rather than a key strength.

In one of its most poignant findings, the Bank for International Settlements analysed what it would take for the blockchain software underpinning bitcoin to process the digital retail transactions currently handled by national payment systems. As the size of so many ledgers swell, the researchers found, it would eventually overwhelm everything from individual smartphones to servers.

“The associated communication volumes could bring the internet to a halt,” the report said.

‘Disaster’

Researchers also said that the race by so-called Bitcoin miners to be the first to process transactions eats about the same amount of electricity as Switzerland does. “Put in the simplest terms, the quest for decentralised trust has quickly become an environmental disaster,” they said.