• The Bank for International Settlements (BIS) has suggested possible solutions to the numerous risks of the crypto industry.
• The BIS has outlined policy actions such as encouraging sound innovation with central bank digital currencies (CBDCs) to address the inefficiencies of traditional finance and limit global crypto adoption.
• The authors of the BIS bulletin note that while the bankruptcies of established projects like LUNA, FTX and others have triggered increased calls for decentralization, the reality is that decentralization in crypto is illusory.
The Bank for International Settlements (BIS) has recently released its latest bulletin entitled “Addressing the Risks in Crypto: Laying Out the Options”, where it attempts to tackle the various risks associated with the crypto industry. In the wake of the high-profile implosions of numerous crypto projects, such as LUNA, FTX, and others, the BIS has called for an urgent response to address such risks before web3 becomes a threat to global financial stability.
The BIS has proposed three possible solutions to permanently eradicate the risks posed by the crypto industry. The first solution is to encourage the development of sound innovation with Central Bank Digital Currencies (CBDCs). By introducing CBDCs, it will help to address the inefficiencies of traditional finance and limit global crypto adoption. The second solution is to improve the governance of crypto projects. This can be done by introducing stronger oversight and regulations that would ensure the projects adhere to regulations and prevent them from becoming too risky. Finally, the third solution proposed by the BIS is to create an international legal framework that would provide a unified approach to cryptocurrency trading. This would help to provide a level of legal certainty in the crypto markets, reducing the risks associated with trading and investment.
Moreover, the BIS notes that while the recent bankruptcies of established projects have triggered increased calls for decentralization, the reality is that decentralization in crypto is illusory. Decentralization is often used as a marketing tool by crypto projects, but in reality, it is impossible to achieve a fully decentralized environment. The BIS suggests that instead of relying solely on decentralization, crypto projects should focus on improving their internal governance and risk management systems. By doing so, crypto projects can better mitigate the risks associated with the crypto industry.
In conclusion, the BIS bulletin outlines various solutions that can be used to address the risks of the crypto industry. By introducing CBDCs, improving the governance of crypto projects, and creating an international legal framework, the BIS believes that the crypto industry can be made safer and more secure. As the crypto industry continues to grow, it is important that these solutions are implemented in order to protect investors and ensure the integrity of the industry.