A recent paper on crypto regulation from the Bank for International Settlements (BIS) has drawn sharp criticism from CoinFund President Christopher Perkins, who labeled its recommendations “completely uninformed and frankly, dangerous.”
The BIS report, focusing on cryptocurrencies, decentralized finance (DeFi), and financial stability, acknowledges the growing significance of digital assets like ETFs, stablecoins, and tokenized real-world assets. However, Perkins strongly contested the paper’s proposed “containment” approach to managing the crypto sector.
“Guys, crypto is not communism. It’s the new internet that provides anyone with access to financial services,” Perkins argued, dismissing comparisons to Cold War strategies. He emphasized the decentralized nature of the technology, stating, “You cannot control it anymore than you control the internet.”
[The @BIS_org just published a new paper, “Cryptocurrencies and decentralised finance: functions and financial stability implication.” The good news is that the authors finally realize that advancements in crypto (including the growth of ETFs, stablecoins and tokenized real world… — Christopher Perkins 🦅🌎⚓️NYC (@perkinscr97) April 19, 2024]
Liquidity Risks Mirroring 2008?
Drawing from his experience at Lehman Brothers during the 2008 financial crisis, Perkins warned that creating an artificial divide between traditional finance and crypto markets could trigger significant liquidity problems. He believes forcing separation between crypto’s 24/7 settlement capabilities and the time-limited traditional system risks creating “the next systemic crisis.”
Instead of isolation, Perkins promotes modernizing legacy financial infrastructure to integrate seamlessly with blockchain technology. “Capital rules should not ‘contain’ public blockchains—they should encourage them!” he asserted, suggesting regulation should focus on upgrading existing systems rather than walling off innovation.
Challenging BIS Views on DeFi and Stablecoins
The CoinFund president also disputed several other findings within the BIS report, particularly its concerns regarding information imbalances in DeFi.
Perkins questioned the validity of criticizing anonymous developers in DeFi, pointing out that traditional financial institutions rarely publicize their development teams.
Furthermore, he addressed the BIS’s apprehension about stablecoins potentially destabilizing economies in nations like Zimbabwe and Venezuela. Perkins countered, “If there is demand for USD stablecoins and it helps improve the condition of anyone in the developing world, perhaps that is a good thing?!” He stressed that individuals globally deserve access to fundamental financial tools, irrespective of their home country’s monetary situation.