The growing adoption of cryptocurrencies can pose risks to the traditional financial system and exacerbate inequality -equivalent wealth, according to the Bank for International Settlements (BIS).
On an April 15 ReportBIS warned that the Number of investors and volume of capital in crypto and Decentralized Finance (Defi) has “reached a critical mass,” whose investor protection has become a “significant concern for regulators.”
The size of the crypto market signals that the authorities should remember about “crypto stability over and over again in the paper that it may have for the tradfi and the real economy,” the report said, featuring the role of stablecoins, which BIS said that “became a way in which participants moved value within the Crypto.
The report called for stablecoin’s targeted regulation on the stability and reserve requirements that guarantee the redemption of stablecoins for US dollars during “stressful market conditions.”
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The report Came two weeks after The financial US house service committee passed Stablecoin Transparency and liability for a better ledger economy, or stable gestures, with 32-117 votes on April 2.
The stable law aims to create a clear framework of regulation for the dollar payment denomination that stablecoins, emphasizes the transparency and protection of the consumer.
On March 13, the Genius Act, short for guidance and establishing a national change for US Stablecoins, passed The Senate Banking Committee by a vote of 18-6. The law aims to promote the principles of collateralization and require full compliance with anti-money laundering laws from stablecoin issues.
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Crypto can exacerbate wealth space
BIS has also raised concerns about how crypto markets can exacerbate inequality -equal income by enabling greater investors to achieve feelings of less sophisticated retail participants, as seen during The fall of the FTX in 2022.
“While prices fell in 2022, users actually exchanged more,” reports BIS. “Most distracting, big bitcoin holders (” whales “) sell as ordinary retail investors (” Krill “) are buying.” This is to add:
“This suggests that the crypto market, which is often presented as an opportunity for inclusive growth and financial stability, can be a way for redistribution of wealth from more difficult to rich.”
The report concluded that Defi and Tradfi had similar underlying economic drivers, but Defi’s “unique features,” such as “intelligent contracts and composability,” present new challenges that require active regulatory interventions to “protect financial stability, during the care of change.
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