SIX on BIS crypto risks report

The Bank of International Settlements (BIS) released the report: “Addressing the risks in crypto: laying out the options” report.

The key findings include how:

  • Recent high-profile failures of FTX and other crypto firms have re-ignited the debate on the appropriate policy response to address the risks in crypto, including through regulation
  • The “shadow financial” functions enabled by crypto markets share many of the vulnerabilities of traditional finance. These risks are exacerbated by specific features of crypto
  • Authorities may consider different – not mutually exclusive – lines of action to tackle the risks in crypto. These include containment or regulation of the crypto sector or an outright ban
  • Central banks and public authorities could also work to make TradFi more attractive. A key option is to encourage sound innovation with central bank digital currencies (CBDCs)

David Newns, head SIX Digital Exchange, said in an emailed commentary: “This BIS bulletin reinforces why investors need the same levels of protection and market resilience in crypto, as they experience in more traditional markets. As the fallout of the FTX saga continues, the industry must find the right standards to coalesce around. The focus should be around bridging the gap between current risk management and governance practice and best industry standards.”

Javier Hernani, head of Securities Services at SIX, said in an emailed commentary: “Prior to the FTX implosion, numerous market participants were considering offering custody. There needs to be a distinct separation between custody and trading, like there is across other markets. It is simply not possible for this market to be kept outside of the institutional financial system. As an industry, we need to bring this asset class in when, and where we can, to manage the risks and standards to make the market safe.”

Read the full report

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