Economists at the Bank for International Settlements (BIS) have recommended three policies that regulators around the world could 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 advised.
BIS Economists Discuss Crypto Policies
The Bank for International Settlements (BIS) released a newsletter last week titled “Addressing Cryptocurrency Risks: Presenting the Options.”
Written by BIS economists Matteo Aquilina, Jon Frost, and Andreas Schrimpf, the report discusses the risks associated with cryptocurrencies and the various options available to regulators and central banks to address these risks.
The authors described “three possible courses of action”. The first is to “prohibit specific cryptographic activities.” Another option is to “isolate cryptocurrencies from commerce (traditional finance) and the real economy.” The third is to “regulate the sector in a similar way to commerce”. However, the report clarifies that the three options are not mutually exclusive and could be “selectively combined to mitigate the risks emanating from crypto activities.”
While noting that crypto markets “have experienced a remarkable series of booms and busts, often resulting in heavy losses for investors,” the BIS economists concluded that “so far, these failures have not spilled over into the traditional financial system. or to the real economy”. However, they warned:
There is no guarantee that they will not in the future, as defi (decentralized finance) and tradfi become more and more intertwined.
“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,” the BIS report concludes.
What do you think of the BIS economists’ crypto policy recommendations? Let us know in the comments section.
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