BIS' crypto warning doesn't consider blockchain's nonfinancial benefits
The Bank for International Settlements recently issued a stern warning about cryptocurrency, contending it will cause substantial harm to the internet and the environment.
While the overall substance of BIS’ report is well argued, it is only relevant in the context of the financial system.
The underlying issue is that the piece doesn’t touch on nonfinancial applications, the areas where blockchain is making most of an impact — for example in aid, welfare, donations, ID, content rights, ownership of data, distribution of resources other than just money. It is important to remember that blockchain fundamentally revolutionizes "the transfer of value" and not just financial value.
Regulation is always one step behind innovation — how can regulation be in place without fully understanding the full potential of the technology? If relevant parties decide to take a collaborative approach, some of the key challenges, for example regulation, will inevitably be met.
Bitcoin and other public blockchain-based cryptocurrencies certainly offer little to no basis for replacement of the monetary system as we know it, and most would agree that bitcoin in particular is very much treated as a speculative asset.
For example, we are now seeing the early crypto adopters exiting and cashing out, and curious, mainstream investors are taking their place, further establishing bitcoin as a tool for trading.
If looking at the report with the sentiment of "cryptocurrencies will break the internet," it’s an extreme exaggeration and is not how I interpret the 24-page article, given that it very much focuses solely on the financial system.