The experts noted cryptocurrencies also require too much electricity, since bitcoin miners processing transactions use about as much electricity as the entire country of Switzerland.
Despite such drawbacks, the report also pointed out the advantages of bitcoin, such as its potential use as part of "low-volume cross-border payment services", rather than as part of everyday transactions.
BIS is often described as the central bank for central banks. "Because cryptocurrencies are anonymous, it is hard to quantify the extent to which they are being used to avoid capital controls or taxes, or to engage in illegal transactions more generally". "That's true whether it's a piece of paper with a face on it, or a digital token".
Known for its significant volatility, bitcoin over the past year has gone on an unprecedented price roller coaster ride positing values as high as $19,783 per bitcoin in December then plunging to $5,900 by February. "However, if the congestion let up, there would be no miners because there would be no incentive to continue mining". "This limits cryptocurrencies' usefulness for day-to-day transactions such as paying for a coffee or a conference fee, not to mention for wholesale payments", the report explained. This is based on the bank's calculation of what would be required if the digital currencies were called upon to carry out all the digital transactions now made by national systems.More news: Japan and Senegal Supporters Filmed Cleaning World Cup Stadiums
Researchers from the University of Texas at Austin last week released a report of findings which speculated that Tether, one of the most-traded cryptocurrencies, showed a pattern of being spent on bitcoin during pivotal moments of the price bubble to manipulate values. For example, at the time of writing, the Bitcoin blockchain was growing at around 50 GB per year and stood at roughly 170 GB.
The report also cites the tendency of networks becoming congested as a particular cryptocurrency grows in value.
A central authority such as a central bank needs to match the supply of the means of payment with transaction demand to be able to increase or decrease the supply. They did so at high frequency, in particular, during times of market stress but also during normal times.
The report, entitled Cryptocurrencies: looking beyond the hype, found cryptocurrencies suffered from a "range of shortcomings" including the extreme degree of decentralisation, which wasted huge amounts of power. Presenting a balanced report would enable people to make their own choice and not encourage fear mongering.