If you have heard about the Bank for International Settlements (BIS), then you will know that they have a rather centralized approach towards managing the global supply of money. And while the executives and staff members in BIS are inclined to embrace blockchain, for example, they still stand very firmly against cryptocurrencies.
A newly published report by BIS has indicated that cryptocurrencies risk causing mayhem not only across the Internet but also in the global money supply. While it may appear self-serving to claim that only a centralized banking may work to ensure a steadfast financial system, BIS may have a point.
BIS has focused on dispelling some commonly repeated half-truths. For example, the bank assailed the claim that cryptocurrencies are in their infancy. The report also argued that the introduction of cryptocurrencies has neglected a substantial part of the world where people still don’t have access to banking services.
How Right Am I If I Am Wrong?
The case mounted by BIS merits some examination. However, it’s also worth pointing out that when the bank was established it also appeared to serve no purpose at all. Conversely, cryptocurrencies have indeed proven to be a true equalizing denominator, managing to demonstrate the power of a system that doesn’t hinge on slow and clumsy centralization.
But overlooking the bank’s concerns where a significant part of the world is still without access to banking services would be short-sighted. Even then, there’s a reason to be hopeful that BIS will pursue further blockchain solutions. The bank sees blockchain as a stepping-stone for a promising future where banking innovation can have a broader outreach and add all those people left on the fringes into the fold.
The possibility of creating stablecoins, based on Bitcoin or Ether, is also tempting. After all, China is now forging ahead with plans to digitalize its national currency and drop cash. Still, BIS doesn’t seem to be interested in that at the time being.
Did I Step On Your Toes?
Some have seen in BIS’ rather hawkish stance not only concern. Blockchain technologies can readily replace most, if not all, of the BIS functions as an institution, some argue. This is acutely visible in the money transfer market where the established ordered has been challenged again and again by emerging start-ups and other tech-savvy companies.
But apart from shunning blockchain and the so-called unicorns, one of the largest banking systems in the world, that of Europe has been championing them, despite a mild opposition from local banks who have been unwilling to give up the gun.
Even then, as the European Central Bank has intervened, someEU Member States, such as France and Germany have been racing to add, acquire and partner with all promising companies in the fintech sector.
BIS endorsement of the blockchain segment is refreshing and it will definitely allow room for optimism that even the most ossified institutions are still open to innovation. However, this may be innovation that puts them well out of business.