The G7 and Bank for International Settlements published a joint report criticizing cryptocurrencies and stablecoins, which pose a threat to financial stability.

The new report by the G7 countries and the Bank for International Settlements (BIS) states that bitcoin and other cryptocurrencies have not turned into a “reliable and attractive means of payment or store of value,” and stablecoins represent “risks” for the global financial system.

The report entitled “Investigating the impact of global stablecoins” was written by the BIS Committee on Payments and Market Infrastructure and the G7 working group. The intergovernmental organization G7 consists of representatives from seven countries of the world, namely the USA, Great Britain, Germany, Japan, France, Canada and Italy.

“Thus, cryptoassets have served more as a highly speculative asset class for certain investors and those engaged in illicit activities rather than as a means to make payments.”

The report lists the main problems related to cryptocurrencies, namely compliance with tax standards, investor protection, confidentiality, money laundering, and financing of terrorism. Moreover, organizations stated that stablecoins could ultimately create problems for international financial institutions, as these cryptoassets could jeopardize fair competition, financial stability, monetary policy, and the international monetary system itself.

“The first wave of cryptoassets, of which Bitcoin is the best known, <...> have suffered from highly volatile prices, limits to scalability, complicated user interfaces and issues in governance and regulation, among other challenges. Thus, cryptoassets have served more as a highly speculative asset class for certain investors and those engaged in illicit activities rather than as a means to make payments.”

Experts of the two organizations came to the conclusion that the key potential benefits from cryptocurrencies and stablecoins tied to fiat currency can be realized only if the above problems are solved first.

“The G7 believes that no global stablecoin project should begin operation until the legal, regulatory and oversight challenges and risks outlined above are adequately addressed, through appropriate designs and by adhering to regulation that is clear and proportionate to the risks,” the report says.