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The growing adoption of cryptocurrencies can present risks for the traditional financial system and exacerbate the inequalities of wealth, according to the Bank for International Settlements (BIS).
In a report of April 15, the BIS warned that the number of investors and the amount of capital in crypto and decentralized finance (DEFI) “reached a critical mass”, the protection of investors becoming a “important concern for regulators”.
The size of the crypto market indicates that the authorities should be concerned about the “stability of the crypto beyond the role it could have for Tradfi and the real economy”, indicates the report, highlighting the role of the stablecoins, which, according to the bis, have “become the means by which the participants transfer the value in the crypto”.
The report calls for targeted stable regulations on stability and reserve requirements that will guarantee the repurchase of floors for US dollars during “stressed market conditions”.
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The report comes two weeks after the American Chamber of Financial Services committed the transparency and the responsibility of Stablecoin for a better economy in the big book, or a stable law, with a vote of 32 to 17 years on April 2.
The stable act aims to create a clear regulatory framework for the stables of payments labeled in dollars, emphasizing transparency and consumer protection.
On March 13, the Genius Act, abbreviated to guide and establish national innovation for American stablecoins, adopted the Senate banking committee by a vote of 18 to 6 years. The law aims to establish warranty guidelines and require full compliance with the anti-silver-silver laws of stablecoin issuers.
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BIS has also raised concerns about how cryptographic markets can worsen income inequalities by allowing larger investors to capitalize on the emotions of less sophisticated retail participants, as shown in the collapse of the FTX in 2022.
“While prices fell in 2022, users actually exchanged more,” noted the BIS report. “More disturbing, large bitcoin holders (” whales “) were sold when ordinary retail investors (” Krill “) bought.” He added:
“This implies that the cryptography market, which is often presented as an opportunity for inclusive growth and financial stability, can be a means of redistributing the wealth of the poorest to the richest.”
The report concludes that DEFI and TRADFI have similar underlying economic engines, but “distinctive characteristics” of Defi, such as “intelligent contract and composition”, present new challenges which require proactive regulatory interventions to “protect financial stability, while promoting innovation”.
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