BIS Report Highlights Concerns and Recommendations for Crypto Assets in Emerging Markets

One sentence summary – A recent report by the Bank for International Settlements (BIS) has expressed concerns about the potential financial risks associated with the growing popularity of crypto assets in emerging market economies (EMEs), recommending that these assets be subject to the same level of scrutiny as traditional assets, particularly focusing on risk and regulatory issues.

At a glance

  • The Bank for International Settlements (BIS) has expressed concerns about the growing popularity of crypto assets in emerging market economies (EMEs).
  • Crypto assets could potentially amplify financial risks within these economies.
  • The BIS recommends subjecting crypto assets to the same level of scrutiny as traditional assets, particularly focusing on risk and regulatory issues.
  • Risks associated with crypto assets include liquidity risk, market risks, and credit risks.
  • The report emphasizes the importance of adopting a balanced approach to regulation and harnessing technology and innovation to refine financial systems.

The details

A recent report by the Bank for International Settlements (BIS) has expressed concerns about the growing popularity of crypto assets in emerging market economies (EMEs).

The report suggests that these digital assets could potentially amplify financial risks within these economies.

The BIS has recommended that crypto assets should be subject to the same level of scrutiny as traditional assets.

This scrutiny should particularly focus on risk and regulatory issues.

The report’s findings are the result of a collaborative effort by BIS member central banks in the Americas.

Several risks associated with crypto assets have been identified in the report.

These include liquidity risk, market risks, and credit risks.

Liquidity risk is increased by vulnerabilities such as centralized trading, unstable coin reserves, susceptibility to investor runs, and operational constraints.

Market risks are linked to the inherent volatility of crypto asset prices and a lack of transparency in the market.

Credit risks are prominent due to weak governance, limited investor protection, and excessive leverage.

The report also points out the potential risk of bank disintermediation if there is a significant shift from bank deposits to privately issued digital assets.

The report also stresses the importance of adopting a balanced approach to regulation.

It warns against outright bans or overly restrictive regulations.

The report suggests that harnessing technology and innovation can help refine financial systems rather than dismissing new innovations as inherently risky.

The BIS report underscores the need for careful consideration of the risks posed by crypto assets in emerging market economies.

It calls for a comprehensive regulatory framework that addresses the various risks identified.

The report also encourages the use of technology and innovation to enhance financial systems while managing potential risks.

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u.today
– A recent report by the Bank for International Settlements (BIS) raises concerns about the allure of crypto assets in emerging market economies (EMEs).
The report suggests that crypto assets might exacerbate financial risks in these economies.
The BIS recommends that crypto assets should be scrutinized just like traditional assets when it comes to risk and regulatory issues.
The report’s findings come from collaborative efforts by BIS member central banks in the Americas.
The BIS report identifies multiple risks associated with crypto assets, including liquidity risk, market risks, and credit risks.
– Liquidity risk is heightened by vulnerabilities such as centralized trading, unstable coin reserves, susceptibility to investor runs, and operational constraints.
– Market risks result from crypto asset price volatility and lack of transparency.
– Credit risks are prominent due to weak governance, limited investor protection, and excessive leverage.
The report highlights the potential risk of bank disintermediation if there is a significant migration from bank deposits to privately issued digital assets.
The report emphasizes the importance of a balanced approach to regulation and cautions against outright bans or restrictive regulations.
The report encourages harnessing technology and innovation to refine financial systems rather than dismissing new innovations as “risky.”

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