Tag: Bank For International Settlements

G20 Announces Standards for Global Crypto Regulation

by Blockchain News

The Financial Stability Board (FSB), the International Monetary Fund (IMF), and the Bank for International Settlements (BIS) have been tasked with establishing standards for a global cryptocurrency regulatory framework, according to an announcement by the Group of 20 (G20) on February 25th, 2023. The G20, comprised of the world’s 20 largest economies, has recognized the need for a coordinated international effort to address the risks associated with cryptocurrencies and establish clear regulatory guidelines for their use.

The announcement comes in response to the rapid growth of cryptocurrencies and their increasing use in global financial transactions. The FSB, IMF, and BIS will deliver papers and recommendations on the regulation, supervision, and oversight of stablecoins, crypto asset activities, and markets by July of this year. The recommendations are expected to establish clear guidelines for the use of cryptocurrencies and help prevent their misuse for criminal activities, such as money laundering and terrorist financing.

The G20 has also recognized the potential benefits of cryptocurrencies and the underlying blockchain technology. The use of cryptocurrencies could offer advantages such as increased efficiency, faster and cheaper transactions, and greater financial inclusion, particularly for the unbanked population. However, the G20 also acknowledges the risks associated with cryptocurrencies, including volatility, market manipulation, and cyber threats.

The regulatory framework is expected to strike a balance between the risks and benefits of cryptocurrencies, ensuring their safe and responsible use. The recommendations are likely to address issues such as licensing requirements, anti-money laundering and counter-terrorism financing (AML/CFT) measures, consumer protection, and market integrity. The G20 recognizes the need for a coordinated international effort to establish these standards and promote global financial stability.

In conclusion, the G20’s announcement marks a significant step towards establishing a global regulatory framework for cryptocurrencies. The recommendations from the FSB, IMF, and BIS will provide clear guidelines for the use of cryptocurrencies, ensuring their safe and responsible use while promoting financial stability. As cryptocurrencies continue to gain in popularity, it is essential to establish clear regulatory guidelines to prevent their misuse and ensure their potential benefits are fully realized.

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Bank for International Settlements Says Global Regulations for Crypto and DeFi Should Be Discussed for Next Year: Report

by Dailyhodl

A high-ranking official at the Bank for International Settlements (BIS) is reportedly calling on financial regulators around the globe to agree on an international regulatory framework for cryptocurrencies next year.

Benoît Cœuré, head of the BIS’ innovation hub, tells the Financial Times that the explosion of decentralized finance (DeFi) has created a “compelling reason” to establish global principles for crypto regulation.

Cœuré, a French economist, says DeFi’s potential interconnectedness with the traditional financial system generates new forms of systemic risk.

He says the Financial Stability Board (FSB), an international body that monitors and makes recommendations about the global financial system, would be a good place to start building a worldwide framework for crypto regulations. He thinks finance ministers could agree on a such framework sometime next year.

Cœuré says the framework should classify whether stablecoins are electronic money, securities or money market funds. He also supports banning pension funds from investing in cryptocurrencies.

Cœuré explains,

“[Investing in crypto] seems to be contrary to the kind of safety that you expect from a pension fund.”

The economist also notes that recently, there has been an increase in conversations about establishing a global crypto regulatory framework.

“Now that it is really growing very fast and… becoming mainstream in different ways, then certainly the time for consistent regulation has come.”

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Bank for International Settlements Issues DeFi Warning, Says Potential for Disaster Not To Be Underestimated

by Dailyhodl

The Bank for International Settlements (BIS) is saying that decentralized finance (DeFi) is a cause of concern to the financial system.

The international financial organization supporting central banks globally to achieve monetary and financial stability says that DeFi inadequately protects investors and is susceptible to money laundering.

According to the Bank for International Settlements, DeFi is prone to “substantial financial vulnerabilities.” BIS says that concerns over solvency could impact fiat-pegged crypto assets like stablecoins, a situation that could lead to massive simultaneous withdrawals and ultimately default.

“At the same time, besides giving rise to first-order money laundering and investor protection concerns, DeFi displays substantial financial vulnerabilities. These parallel but exceed those in more traditional forms of finance.

For instance, stablecoins – the grease between DeFi wheels – are subject to classic runs: the backing of liquid claims with less liquid reserve assets can touch off downward price spirals akin to those stemming from redemptions in the investment fund industry.”

The Bank for International Settlements says that while it is unclear whether the risks in the crypto ecosystem could spread to traditional finance, the possibility should not be “underestimated.”

“In the crypto ecosystem, risks have so far surfaced mainly infrequent and sizeable price crashes. Whether such fragilities are limited to this ecosystem or can spill over to the traditional one is still unclear.

But the potential for spillovers should not be underestimated, especially since the stablecoin arrangements themselves can create important links. As history confirms, anything that grows exponentially is unlikely to remain self-contained and thus merits the closest attention.”

The Bank for International Settlement also says that the benefits of DeFi to the “real economy” are “difficult to detect.”

“Being a new system of payments and transactions, it [DeFi] promises to overcome some of the disadvantages of traditional finance, such as high costs and slow speed.

For now, these gains are difficult to detect: DeFi appears to be operating largely within its own ecosystem, with little in the way of financial intermediation services being provided to the real economy.”

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Four Countries to Conduct Cross Border CBDC Payment Trials

by Blockchain News

The Bank for International Settlements (BIS) has joined forces with the central banks of South Africa, Malaysia, Singapore, and Australia to kick start a project dubbed Dunbar aimed at testing the use of central bank digital currencies (CBDCs) in cross border payments.

Per the announcement on Thursday:

“Led by the Innovation Hub’s Singapore Centre, Project Dunbar aims to develop prototype shared platforms for cross-border transactions using multiple CBDCs. These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks.”

By rolling out the trial, the central banks intend to enable financial institutions to cut the time and cost of transactions and eliminate the need for intermediaries. 

CBDCs represent the digital form of a nation’s fiat money. They are controlled directly by the country’s central bank and are backed by national credit and government power. 

To stabilise the control over the supply and demand of currency for the seemingly inevitable cashless society in the future, countries are now launching experiments to test the workings of CBDC.

Enhancing the G20 roadmap for cross-border payments

According to the report:

“Project Dunbar’s work will explore the international dimension of CBDC design and support the efforts of the G20 roadmap for enhancing cross-border payments.”

The CBDC payment trials facilitate seamless multi-currency fund transfers, which is a significant step towards the global vision of making payments cheaper and faster.

In October 2020, the BIS released a report identifying the foundational principles necessary for any publicly available CBDCs to help central banks meet their public policy objectives. Some of the principles entailed CBDCs coexisting with cash and other types of money in a flexible and innovative payment system.

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Australia, Singapore, Malaysia and South Africa launch joint CBDC pilot

by Cointelegraph

The central banks of Australia, Singapore, Malaysia and South Africa have announced a joint initiative to trial international settlements using central bank digital currencies (CBDCs).

The initiative, dubbed Project Dunbar, will prototype shared platforms enabling direct transfers between institutions using digital currencies issued by multiple central banks. The pilot’s findings will be used to inform the “development of global and regional platforms” in addition to supporting the G20’s roadmap for improving cross-border payments.

Project Dunbar will be carried out in partnership with the Bank for International Settlements (BIS) Innovation Hub from its Singapore Center. The project will engage multiple partners to develop different DLT platforms and explore different designs that would enable central banks to share CBDC infrastructure.

A joint announcement emphasizes the efficiency savings associated with distributed ledger technology (DLT)-based payments, stating:

“These multi-CBDC platforms will allow financial institutions to transact directly with each other in the digital currencies issued by participating central banks, eliminating the need for intermediaries and cutting the time and cost of transactions.”

Assistant Governor of the Reserve Bank of Australia (RBA) Michele Bullock highlighted that “enhancing cross-border payments has become a priority for the international regulatory community,” adding that the RBA is “very focused” on the matter in its domestic policy work.

“Project Dunbar brings together central banks with years of experience and unique perspectives in CBDC projects and ecosystem partners at advanced stages of technical development on digital currencies,” said Andre McCormack, the head of the BIS Innovation Hub Singapore Centre. He added:

“With this group of capable and passionate partners, we are confident that our work on multi-CBDCs for international settlements will break new ground in this next stage of CBDC experimentation and lay the foundation for global payments connectivity.”

The RBA has consistently downplayed the need for a domestic CBDC however, citing the success of the New Payments Platform, which allows instant digital transfers 24-hours a day.

Related: India CBDC pilot may commence in December, says RBI governor

Project Dunbar is expected to demonstrate technical prototypes of shared DLT platforms at the Singapore FinTech Festival in November of this year. The initiative expects to publish its complete findings in early 2022.