Cryptocurrencies ‘warrant extreme caution’, Morningstar warns

Even though decentralisation remains a core tenet of the crypto ecosystem, further adoption of the asset class hinges on its ability to integrate with existing financial services, according to Morningstar’s maiden analysis of the industry.

The report, titled the 2022 Cryptocurrency Landscape, said the pursuit of an unmediated electronic cash system goes back as far as the collapse of Bretton Woods and the financial crises and hyperinflation that defined the 1970s. Satoshi Nakamoto’s 2008 white paper on blockchains, bitcoin and peer-to-peer payments was merely the initial splash for the cryptocurrency wave we continue to ride.

Source: Morningstar

Since then, crypto assets have spawned “entire parallel economies” and potential applications, Morningstar said, but it also warned the industry’s reliance on decentralised infrastructure could set up “meaningful barriers against real-world use cases”.

The research argued while decentralisation can help users move digital assets around for the sake of interaction with the real world, practical road bumps exist.

In theory, applications such as smart contracts can automate on-chain transactions…

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