The growing adoption of cryptocurrencies can present risks to the traditional financial system and exacerbate wealth inequality, according to the Bank of International Agreements (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) have “reached a critical mass”, with the protection of investors becoming a “significant concern for regulators.”
The size of the cryptographic market indicates that the authorities must be concerned about the “stability of cryptography beyond the role it can have for tradfi and the real economy,” the report establishes, highlighting the role of the stable, which the BIS said that they have become the environment through which participants transfer value within the crypto. “
The report requires the regulation of the stabilization directed on the stability and requirements of the reserve assets that will guarantee the redemption of Stablecoins for US dollars during the “stressed conditions of the market.”
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The report occurs two weeks after the Financial Services Committee of the US Chamber of Representatives.
The stable act aims to create a clear regulatory framework for payment establishments called in dollars, emphasizing transparency and consumer protection.
On March 13, the Genius law, abbreviation for guiding and establishing national innovation for the stable of the United States, approved the Senate Banking Committee by an 18-6 vote. The law aims to establish collateralization guidelines and requires full compliance with the laws against money laundering of Stablecoin emitters.
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Crypto can exacerbate the wealth gap
The bis also raised concerns about how encryption markets can worsen income inequality by allowing investors to the greatest capital of less sophisticated retail participants, as seen during FTX collapse in 2022.
“As prices fell in 2022, users really negotiated more,” said the BIS report. “The most disturbing, Bitcoin’s great headlines (” whales “) sold as ordinary retail investors (” Krill “) were buying.” Added:
“This implies that the encryption market, which is often presented as an opportunity for inclusive growth and financial stability, can be a means to redistribute the wealth of poor to richer.”
The report concludes that Defi and Tradfi have similar underlying economic drivers, but the “distinctive characteristics” of Defi, such as the “intelligent contract and composition”, present new challenges that need proactive regulatory interventions to “safeguard financial stability, while promoting innovation.”
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