BIS Innovation Hub chief urged states to avoid crypto regulatory arbitrage
Contents
- Global cooperation
- Consumer protection
In his recent interview with the Financial Times, Benoit Coeure, director of the BIS Innovation Hub, revealed that a global regulatory framework for cryptocurrencies would likely be ready by 2022.
Coeure noted that it is high time to adopt comprehensive regulations as crypto is spreading at a rapid rate.
The former member of the executive board of the European Central Bank seems particularly concerned about the rapid growth of the decentralized finance sector (DeFi) which constitutes a threat to traditional finance (TradFi), thus creating “systemic risks”.
Global cooperation
The eminent French economist says different jurisdictions could be on the right track to come up with uneven approaches to regulating crypto that will be ineffective on a global scale.
However, he believes there is still enough time to avoid regulatory arbitrage and create a global regulatory framework for the nascent asset class.
Privacy concerns could be the biggest obstacle to a solid cooperation on crypto:
The final decisions of sovereign states will be … a balance between sovereign strategic considerations on the one hand and considerations of the proper functioning of the financial system on the other.
Consumer protection
Coeure says consumer protection should be a top priority for policymakers.
He proposed to ban pension funds from exposure to cryptocurrencies to avoid risks associated with the mercurial asset class:
This seems contrary to the kind of security one expects from a pension fund.
In March, Coeure ruled that Bitcoin was a failing currency due to its volatility, while also alarming the cryptocurrency ambitions of big tech companies.
In his most recent interview, he said central bank digital currencies would act as “the glue” for the entire financial system:
It is not that the CBDC is the sovereign alternative to private money, but rather that the CBDC is the glue that will hold the system together.