Cryptocurrencies and the economics of money

Speech by Mr Hyun Song Shin, Economic Adviser and Head of Research of the BIS, on the occasion of the Bank's Annual General Meeting, Basel, 24 June 2018.

Much has already been said about the impractical nature of cryptocurrencies as means of payment and the scope for fraud and other illicit activities that they open up. But there are more basic issues to do with their economic properties. They lack the scalability to allow them to function as a payment system. More seriously still, they lack finality. That is, a payment being recorded in the ledger does not guarantee that it is final and irrevocable. History can be rewritten, and the system is subject to cascades of voided payments. In both cases, the economic incentives are key, not just the technology. Attempting to recreate trust in a decentralised way cuts too many corners and creates too many bottlenecks for cryptocurrencies to function as a monetary system.