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July 20, 2018, 10:08:21 PM |
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Cryptocurrency is considered to feel a bad effect if the greater the number of people who use it. This was revealed by the Bank of International Settlements (BIS), a financial institution headquartered in Basel, Switzerland.
Amid the rise of digital currency, BIS gave warning because they thought that virtual currency does not have the ability to meet the demand. It has the potential to lose trust and efficiency.
The institution added that any form of money operating in a large system must be reliable to keep its value stable. In addition, trust must also be gained in looking at its ability to meet demand efficiently, as written BIS in its annual report.
BIS also writes that beliefs can disappear instantly because of the vulnerability of decentralized networks that are the cornerstone of cryptocurrency. In addition to vulnerability, the network, known as blockchain technology, is also seen as potentially hoarding transactions if the number of its users is growing.
This hoarding refers to the ability of one of the most famous cryptocurrencies, namely Bitcoin, which is only capable of completing at most seven transactions per second to date. The limitations are expected to make confidence in the virtual currency disappear.
"The belief in cryptocurrency can evaporate at any time because of the vulnerability of the decentralized system that underlies every recorded transaction," BIS writes.
"This not only raises a question mark on its ability as a payment method, but it can also make cryptocurrency stop operating as a tail of its value that can continue to fall," he added.
The statement was supported with one opinion from Head of Research BIS, Hyun Song Shin. According to him, many people who keep cryptocurrency purely because of mere speculation.
In addition, according to the financial institution, the dependence of virtual currency owners and cryptocurrency miners in recording and guaranteeing every transaction is also considered a drawback. That's because the activity requires too much energy whose value is not cheap.
"Bitcoin is a combination of bubbles and natural disasters," said Agustin Carstens, General Manager of BIS, trying to describe the cryptocurrency, as quoted by Reuters on Wednesday (20/06/2018).
BIS party has also asked the central bank in some countries to think carefully, especially the risk that can be generated, if you want to publish its own cryptocurrency. Until now, indeed there is no central bank that does it.
In addition, BIS also mentioned that regulation of digital coins on a global scale is needed. This is because a number of financial institutions and other private companies already offer services related to cryptocurrency
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