Concerns Over BIS’s Stance on Digital Currencies
The head of a blockchain investment firm has characterized the Bank for International Settlements’ (BIS) recent stance on digital currencies and decentralized finance (DeFi) as perilous for global financial stability. Christopher Perkins, the president of CoinFund, expressed his discontent via a post on April 19, arguing that many of BIS’s suggestions in their April 15 report, which focused on cryptocurrencies and DeFi, are misguided and potentially harmful to the financial landscape.
BIS’s Strategy and Perkins’s Opposition
The BIS has been advocating a strategy to isolate crypto markets from traditional finance, which Perkins strongly opposes. He emphasized that cryptocurrencies are a progressive development, likening their potential to revolutionizing finance just as the internet did in the past.
You cannot control it any more than you can control the internet.
He highlighted the importance of accessibility that crypto affords to anyone with internet connectivity.
Warnings on Liquidity Risks
Perkins cautioned that the BIS’s proposed containment strategy could inadvertently heighten risks in traditional finance, warning of liquidity threats of unprecedented magnitude due to the 24/7 nature of the crypto market compared to standard trading hours in conventional finance. He believes these approaches could exacerbate systemic risks rather than alleviate them.
Critique of DeFi’s Portrayal
The BIS report highlighted a pivotal moment, noting that the participation and capital flowing into the crypto space have reached a critical threshold, raising alarms regarding investor protection—a major consideration for regulatory bodies. Perkins countered claims made in the report, particularly those portraying DeFi as problematic, insisting that it offers significant advancements over the traditional banking system’s opacity and inequality.
Transparency Issues
In addressing the BIS’s concerns about the anonymity of DeFi developers, Perkins criticized the lack of transparency in traditional finance, pointing out that public disclosures for private companies continue to decline.
Stablecoins and Economic Impact
Further, Perkins tackled the BIS’s apprehensions about stablecoins potentially sparking economic instability in nations like Venezuela and Zimbabwe. He argued that the emergence of USD stablecoins could actually serve those in developing nations, suggesting the demand for such assets could provide beneficial opportunities.
Industry Perspectives
Perkins’s views resonate with those of others in the industry, such as Lightspark co-founder Chrisitan Catalini, who also expressed skepticism regarding the BIS’s analysis. He used a metaphor to critique the report, comparing it to
drafting parking rules for autonomous drones
, highlighting the apparent technological disconnection in the BIS’s approach to modern financial innovations.
