Blockchain technology may however be well-suited to other areas, for instance, supply chain management. 10. See S. Shukla (2022), The ‘Blockchain Trilemma’ That’s Holding Back Crypto, The Washington Post, 11 September. 11. As of 14 June bitcoin had a market capitalisation of € billion. Source: CoinGecko. 12. See Gschossmann, I. van der Kraaij, A., Benoit, P-L. and Rocher, E. (2022), “Mining the environment – is climate risk priced into crypto-assets?”, ECB Macroprudential Bulletin, 11 July. 13. Moreover, Makarov and Schoar show that bitcoin mining is highly concentrated: the top 10% of miners control 90% of mining capacity and just 0.1% (about 50 miners) control close to 50% of mining capacity. Alternatively, blockchains based on proof of stake are faster, but also tend towards centralisation, as larger coin holders can reap more rewards, concentrating power and the risk of 51% attacks. See Makarov, I. and Schoar, A. (2022), “Blockchain Analysis of the Bitcoin Market”, NBER Working Papers, No 29396, National Bureau of Economic Research, 18 April. 14. See Soares, X. (2023), “On-Chain vs. Off-Chain Transactions: What’s the Difference?”, CoinDesk, 11 May. 15. See Walch, A. (2018), “Chapter 11 - Open-Source Operational Risk: Should Public Blockchains Serve as Financial Market Infrastructures?”, in Chuen, D.L.K. and Deng, R. (eds. ), Handbook of Blockchain, Digital Finance, and Inclusion, Vol. 2, Academic Press, pp. 243-269. 16. Moreover, the fact that data stored on the blockchain is immutable and transparent may put the technology in conflict with digital privacy rights. 17.

Policymakers should be wary of supporting an industry that has so far produced no societal benefits and is increasingly trying to integrate into the traditional financial system, both to acquire legitimacy as part of that system and to piggyback on it. Instead, regulators should subject cryptos to rigorous regulatory standards, address their social cost, and treat unsound crypto models for what they truly are: a form of gambling. This may prompt the ecosystem to make more effort to provide genuine value in the field of digital finance. Shifting narratives: from decentralised payments to centralised gambling The core promise of cryptos is to replace trust with technology, contending that the concept “code is law” will allow a self-policing system to emerge, free of human judgement and error. This would in turn make it possible for money and finance to operate without trusted intermediaries. However, this narrative often obfuscates reality. Unbacked cryptos have made no inroads into the conventional role of money. And they have progressively moved away from their original goal of decentralisation to increasingly rely on centralised solutions and market structures. They have become speculative assets[8], as well as a means of circumventing capital controls, sanctions or financial regulation. Blockchain limitations A key reason why cryptos have failed to make good on their claim to perform the role of money is technical. Indeed, the use of blockchain – particularly in the form of public, permissionless blockchain – for transacting crypto-assets has exhibited significant limitations.