BIZ Offers New technologies in the crypto industry
2023.01.12 14:15
BIZ Offers New technologies in the crypto industry
By Tiffany Smith
Budrigannews.com – A seemingly novel solution was developed after economists at the Bank of International Settlements (BIS) examined the crypto ecosystem’s inherent risks. Create an alternative, they advised in a January 12 bulletin. Digital currency issued by the central bank (CBDC) was what they had in mind.
The bulletin’s authors, led by BIS senior economist Matteo Aquilina, said they wanted to learn from the 2022 crypto winter. They stated that the recent failures of crypto asset markets highlight the necessity of addressing crypto’s risks before those markets become “systemic.”
According to the authors, centralized and decentralized crypto finance “share many of the vulnerabilities that are familiar from traditional finance (TradFi).” Cryptocurrency, on the other hand, presents greater risks due to significant information asymmetries, liquidity and maturity mismatches, and high leverage.
Despite its drawbacks, crypto is unlikely to disappear on its own, the authors noted. They classified potential risk-reduction measures into the following three subcategories: banning specific crypto-related activities, isolating crypto from “the real economy,” and regulating crypto “in a manner akin to TradFi.” Within that framework, they provide a separate appendix that breaks down national and international crypto regulatory initiatives.
They noted that there are advantages and disadvantages to each option. Among other things, a ban, for instance, “could conflict with founding principles of society.” However, all three methods can be used simultaneously:
“Central banks may want to do more because of their mandates for public policy. They might be able to help make the financial system work better by encouraging sound innovation in TradFi.
One important part of that strategy might be to speed up payments and save money:
“The innovation that is present in certain crypto areas could be utilized to improve the manner in which TradFi provides services.”
The authors asserted that CBDC provides a number of advantages, making it one of the most effective methods for accomplishing that:
They “could assist in lowering the cost of payments,” “could promote user control over data and privacy,” and “could strengthen the integrity of the system.”
An increasing number of people are opposing cryptocurrency through platforms provided by international and supranational organizations. Fabio Panetta, a member of the executive board of the European Central Bank (ECB), recently made a similar argument in favor of the growth of CBDC over cryptocurrencies. An earlier article on the same ECB blog stated that cryptocurrency was on the “road to irrelevance.” Additionally, the International Monetary Fund has come under fire for its anti-cryptostance.
More Growth of illegal crypto payments is increasing
