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 As the world progressively considers the idea of increasing the use of crypto assets in the financial system, some institutions have raised warnings. Recently, the Bank of International Settlements (BIS), warned against the use of cryptocurrencies as a monetary tool. 
 The Bank for International Settlements (BIS) is a Switzerland based international financial institution which is owned by 63 national central banks. The institution offers banking services for national central banks and a forum for discussing monetary and regulatory policies. 
 In its recent report, the BIS takes a shot on cryptocurrencies and says that crypto’s “inherent structural flaws” make it unsuitable as a monetary tool. Notably, the report was sent to G-20 as the entity is progressing towards regulating the crypt sector. 
 The G20 or Group of 20 is an intergovernmental forum comprising of 19 countries and the European Union (EU). It works to address major issues related to the global economy, such as international financial stability, climate change mitigation and sustainable development. 
 Further, the report cites several issues of instability, inefficiency and accountability that outweigh potential innovative benefits such as automated payments. Ahead of the meeting of G20 finance ministers and central bank governors scheduled to take place in Gandhinagar, India this weekend, the BIS report downplayed the factor of adoption and the rising interest of masses. 
 The report stated that despite the millions of retail and institutional investors getting involved in the growing sector, “crypto has so far failed to harness innovation to the benefit of society.” The report added: 
 Crypto remains largely self-referential and does not finance real economic activity. Inherent structural flaws make it unsuitable to play a significant role in the monetary system. 
 Reportedly, the BIS report assessing the market and its features comes after a turbulent year for the sector. Hence, taking the examples of collapses of events, the report cites the huge losses incurred last year. The report states some incidents like the collapses of FTX and of the Terra ecosystem, along with the risk of hacks and rug pulls and the problems of scaling to become the size a full-on payment system will need permissionless blockchains that grow too large and get congested. 
 Notably, the central bankers’ skepticism about crypto is nothing new and has been pretty evident in the past months. Largely, the central banks fear that new payment systems could disrupt or displace the traditional fiat currencies they issue. 
 Additionally, members of the G20 appear to be cautious about encouraging stablecoins as well as the cryptocurrencies in large. Reportedly, in the case of stablecoins, the group fear that as they are tied to the value of fiat currencies, the effect on centralized monetary policy can be even more pronounced in emerging markets. 
 While BIS has maintained a cautious approach as evident through its analyses and reports in the past weeks, the G20 has <a href="https://news.todayq.com/crypto-regulation-in-the-list-of-talks-at-the-ongoing-g20-finance-ministers-meet-in-india/" rel="noopener noreferrer nofollow">prioritised</a> the act of framing regulations. In February, the institution had <a href="https://news.todayq.com/bis-report-highlights-the-need-for-investor-protection-in-the-crypto-space/" rel="noopener noreferrer nofollow">published</a> a report highlighting the need for global coordination in regulating digital assets and warned against increased exposure to the global financial system. 
 However, the bank’s increasing <a href="https://news.todayq.com/bis-plans-to-heighten-focus-on-cbdcs-launches-project-to-monitor-stablecoins/" rel="noopener noreferrer nofollow">hesitancy</a> to crypto converts into increasing likeliness towards the central bank digital currencies which the BIS refers to as a more secured way. In its recent report on CBDCs, the agency <a href="https://news.todayq.com/bis-survey-93-of-central-banks-worldwide-are-exploring-cbdc-work/" rel="noopener noreferrer nofollow">suggested</a> that a total of 15 CBDCs will be in use by 2030 when highlighting its increasing relevance in the rising adoption of digital assets. Additionally, the BIS had also <a href="https://news.todayq.com/biss-project-icebreaker-demonstrates-benefits-of-cbdcs-for-cross-border-payments/" rel="noopener noreferrer nofollow">launched</a> Project Icebreaker to test the scope of cross border transactions in CBDCs. 
 Interestingly, while the agency has largely been <a href="https://news.todayq.com/bis-general-manager-expresses-his-skepticism-over-stablecoins/" rel="noopener noreferrer nofollow">cautious</a> to crypto, it <a href="https://news.todayq.com/bis-unveils-blueprint-for-global-unified-ledger-dismisses-crypto-as-flawed-system/" rel="noopener noreferrer nofollow">launched</a> a unified ledger for CBDCs and tokenised assets. The report held tokenization as the next major leap in the evolution of the monetary system and said that by digitizing and representing claims on a programmable platform, tokenization revolutionizes the way financial transactions are executed. Nonetheless, with the growing adoption of crypto, the nations will have to think of ways to efficiently regulate instead of outright eradication. 
 © Todayq News
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BIS report to G20 talks of Crypto hacks and collapses; rejects its monetary use

Todayq News

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