The Bank for International Settlements (BIS), often described as the central bank for central banks, released a damning assessment of cryptocurrencies on June 17, 2018, as part of its annual economic report. In a comprehensive 24-page chapter, the Basel-based institution argued that digital currencies like Bitcoin suffer from fundamental shortcomings that prevent them from ever fulfilling the promises made by their most enthusiastic supporters.
TL;DR
- The BIS published a 24-page critique of cryptocurrencies in its 2018 annual economic report
- The report cited excessive energy consumption, price volatility, and fraud vulnerability as key flaws
- Bitcoin mining alone consumes roughly as much electricity as the entire country of Switzerland
- The BIS argued that decentralization—often touted as crypto’s strength—is actually a fatal design flaw for scaling
- Distributed ledger technology may still have niche applications in cross-border payments
The Case Against Cryptocurrency as Money
At the time of the report’s release, Bitcoin was trading at approximately $6,735, while Ethereum sat near $519, according to CoinMarketCap data. Despite billions in market capitalization, the BIS laid out a methodical argument for why these assets could never function as proper money.
The institution identified three primary defects. First, cryptocurrencies are simply too volatile to serve as a reliable store of value or unit of account. Second, the energy requirements of proof-of-work mining present an environmental concern that grows with adoption—Bitcoin’s network was already consuming electricity comparable to Switzerland’s entire national usage. Third, the absence of centralized oversight makes the ecosystem vulnerable to fraud and manipulation.
Decentralization: Strength or Fatal Flaw?
Perhaps the most striking argument in the BIS report targeted the very feature that cryptocurrency advocates champion most loudly: decentralization. According to the BIS, removing trusted intermediaries does not eliminate the need for trust—it simply relocates it to a network of anonymous validators whose incentives may not align with users.
The report went further, presenting calculations showing that if cryptocurrencies were to process the volume of digital retail transactions currently handled by national payment systems, the data load would overwhelm everything from individual smartphones to commercial server infrastructure. In other words, the decentralized architecture that makes Bitcoin censorship-resistant also makes it fundamentally incapable of scaling to meet real-world payment demands.
A Silver Lining for Distributed Ledger Technology
Despite its harsh conclusions about cryptocurrencies as money, the BIS did not dismiss distributed ledger technology entirely. The report acknowledged that DLT could improve efficiency for low-volume, low-value cross-border transactions, where traditional banking rails remain slow and expensive. The institution also conceded that blockchain technology has genuine value in niche settings where the benefits of decentralized access outweigh the higher operating costs of maintaining multiple copies of a distributed ledger.
However, the BIS was clear that none of the constructive use cases it identified required the underlying technology to be packaged as a cryptocurrency. The implication was clear: the blockchain may have a future, but that future does not necessarily include Bitcoin or its imitators as mediums of exchange.
Regulatory Landscape Continues to Evolve
The BIS report arrived during a period of intense regulatory scrutiny for the crypto industry. Just days earlier, William Hinman, director of the Division of Corporation Finance at the U.S. Securities and Exchange Commission, delivered a speech at the Yahoo All Markets Summit in San Francisco declaring that Bitcoin and Ethereum are not securities under U.S. law. Hinman cited the decentralized nature of both networks as the key factor in that determination.
The SEC’s stance provided a measure of regulatory clarity for the two largest cryptocurrencies, though the legal status of many other digital assets—particularly those sold through initial coin offerings—remained ambiguous. The BIS report, combined with the SEC’s pronouncements, painted a picture of a market caught between institutional skepticism and incremental regulatory acceptance.
Why This Matters
The BIS report represents one of the earliest comprehensive critiques of cryptocurrency from the highest levels of the global financial establishment. While the institution’s conclusions were overwhelmingly negative, the fact that the BIS devoted significant analytical resources to studying crypto signaled that digital assets could no longer be dismissed as a fringe phenomenon. The report also highlighted tensions that persist to this day: between decentralization and scalability, between innovation and regulation, and between the promise of trustless systems and the practical demands of global commerce.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research before making investment decisions.
the bis report was a hatchet job that ignored everything crypto was doing right
bis reports on crypto always read like they were written by people who never used it
the energy consumption critique aged poorly too. BTC mining uses a fraction of global banking infrastructure energy costs
traditional finance dismissing crypto in 2018 looks foolish in hindsight
bis calling crypto unfit as money while banks scramble to adopt blockchain is peak irony
BIS calling crypto unfit as money while their member banks race to issue CBDCs is the most ironic policy document of 2018