The Bank for International Settlements’ (BIS) initiative to segregate crypto markets and its contentious suggestions on decentralized finance (DeFi) and stablecoins pose a “threat” to the whole financial system, cautions the leader of a blockchain investment company.
“Numerous recommendations and findings — likely arising from a blend of trepidation, hubris, or ignorance — are utterly misinformed and, truthfully, perilous,” CoinFund president Christopher Perkins stated in an April 19 post on X, referencing the BIS’ April 15 document entitled “Cryptocurrencies and Decentralized Finance: Functions and Financial Stability Implications.”
BIS suggestions expose TradFi to dangers of “unimaginable scale”
“Crypto is not communism,” Perkins remarked, countering the BIS’ advocacy for a “containment” strategy to sever crypto from traditional finance and the larger economy.
“It’s the new internet that grants anyone with an internet connection access to financial services,” Perkins noted. “You cannot govern it any more than you can regulate the internet,” he added.
Perkins cautioned that a containment strategy towards crypto would render the traditional financial system vulnerable to colossal liquidity risks “of unimaginable scale,” particularly since the crypto market operates in real-time, 24/7, whereas traditional financial markets close after trading hours.
“If enacted, they will create—not alleviate—the systemic risk they aim to avert.”
The report cautioned that the amount of investors and volume of capital within crypto and DeFi have “achieved a critical mass,” making investor protection a “major concern for regulators.”
Perkins contested the BIS’ assertion that DeFi poses notable challenges, arguing that it instead signifies a “considerable enhancement” over the “opacity” and disparities of the traditional financial system.
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Addressing the BIS’s worries regarding the anonymity of DeFi developers, Perkins questioned its significance:
“Apologies, but when was the last occasion a TradFi organization published a list of its developers? Certainly, public companies offer a degree of disclosures and transparency, but they appear to be diminishing in favor of private markets.”
Perkins also challenged the BIS’s concerns related to stablecoins that they could instigate “macroeconomic instability in nations like Venezuela and Zimbabwe.”
“If there is a demand for USD stablecoins and it aids in enhancing the situation of anyone in the developing world, perhaps that could be beneficial,” Perkins suggested.
Perkins wasn’t solitary in disparaging the contentious report. Lightspark co-founder Christian Catalini also chimed in, posting a series of critiques on X that same day. Catalini encapsulated the report with the analogy:
“Consider: drafting parking laws for a fleet of self-driving drones — sincere work, yet two technological advancements behind.”
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