Three Crypto Policies for Regulators to Adopt, According to BIS Economists

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Three regulations that regulators throughout the world may implement in order to address the risks posed by cryptocurrencies have been advocated by economists at the Bank of International Settlements (BIS). Authorities can now take into account various policy stances while also working to enhance the current monetary system in the public good, they suggested.

Economists at BIS Talk About Crypto Policies

Addressing the dangers in crypto: laying out the options is the headline of a report released last week by the Bank of International Settlements (BIS).

The research, written by BIS economists Matteo Aquilina, Jon Frost, and Andreas Schrimpf, addresses the dangers posed by cryptocurrencies and the measures that regulators and central banks might take to mitigate these dangers.

“Three potential avenues of action” were described by the writers. “Ban particular crypto activity” is the first step. To “isolate crypto from tradfi [conventional finance] and the real economy” is another approach. “Regulate the sector in a way analogous to tradfi” is the third option. The paper makes it clear, though, that the three alternatives can be “selectively coupled to limit the dangers originating from crypto activities and are not mutually incompatible.”

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The BIS experts said that despite the fact that cryptocurrency markets “have seen a spectacular series of booms and busts, frequently resulting in substantial losses for investors,” “these failures have so far not spilled over to the traditional financial system or the actual economy.” But they issued a warning:

Given the growing interdependence between defi (decentralized finance) and tradfi, there is no guarantee that they won’t do so in the future.

The BIS research states that “authorities can now take into account a range of policy stances and endeavor to enhance the current monetary system in the public interest.”

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