Economists at the Bank for International Settlements (BIS) recommend three policies that regulators around the world can adopt to address the risks posed by cryptocurrencies.” Authorities can now consider a variety of policy approaches and at the same time work to improve the existing monetary system in the public interest,” they advise.
BIS Economists Discuss Crypto Policy
The Bank for International Settlements (BIS) released a bulletin last week titled “Addressing the risks in crypto: Laying out the options.”
The report, authored by BIS economists Matteo Aquilina, Jon Frost, and Andreas Schrimpf, discusses the risks associated with cryptocurrencies and the various options available to regulators and central banks to address these risks The report is based on a survey of the market and the authors’ own experience with cryptocurrencies.
The authors outline “three potential lines of action,” the first being to “ban certain crypto activities.” The second is to “isolate crypto from trafi [traditional finance] and the real economy,” and the third is to “regulate the sector in a manner similar to tradfi.” However, the report clarifies that the three options are not mutually exclusive and “can be selectively combined to mitigate risks emanating from crypto activities.”
While noting that the crypto market has “experienced a remarkable series of booms and busts, often resulting in significant losses for investors,” BIS economists “have so far not seen these failures spill over into the traditional financial system or the real economy.” They conclude. Nonetheless, they warn.
There is no guarantee that this will not happen in the future, as defi (decentralized finance) and trafi become more intertwined.
“As the authorities consider different policy approaches, they can now work to improve the existing monetary system in the public interest,” the BIS report concludes.
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