Bank for International Settlements called CBDCs the backbone of future monetary systems

Analysts consider cryptocurrencies to be less efficient and secure than central bank digital currencies

28.06.2022 - 07:25

267

2 min

What’s new? Experts at the Bank for International Settlements (BIS) have published an “Annual Economic Report” stating that cryptocurrencies and decentralized finance (DeFi) have deep structural limitations that prevent them from becoming the backbone of monetary systems, unlike central bank digital currencies (CBDCs).

Retail #CBDCs can be designed with inclusive features to serve users that currently do not have access to digital payments #BISAnnualEconReport https://t.co/Qvmq4W2N9h pic.twitter.com/TbrozsIFP4— Bank for International Settlements (@BIS_org) June 26, 2022

What other data is contained in the report? According to BIS analysts, the recent collapse of the TerraUSD (UST) stablecoin and its backing token LUNA highlighted the weakness of the system, which is maintained by selling assets for speculation. In addition, blockchain projects are unable to scale without expanding security threats, experts believe.

As a counterbalance to cryptocurrencies, the BIS cites CBDCs as the backbone of future monetary systems. Such systems must combine new technological capabilities with central bank money at their core, analysts said. Among the main benefits of CDBCs are reduced transaction costs and greater access to financial services.

In May, the BIS, in cooperation with the central banks of Malaysia, Singapore, Australia, and South Africa, finalized two prototypes of central bank digital currency platforms. With CBDC, the financial institutions will be able to use issued cryptocurrencies for direct operations with each other. This solution will improve the efficiency of transactions and reduce the economic costs of international payments.

Author: