An economist at the Bank for International Settlements has determined that cryptocurrencies are not sought as an alternative to fiat currencies or regulated finances, so “technology-neutral regulation of this asset class” is recommended. The economist spoke of “embedded supervision” and added: “The main goal is inexpensive supervision of decentralized markets”.
BIS Economist proposes regulatory approach for cryptocurrencies
The Bank for International Settlements (BIS) published a working paper on Thursday on “The Socio-Economic Drivers of US Cryptocurrency Investments”. It was written by Raphael Auer, a senior economist in innovation and digital economy at the BIS, and David Tercero-Lucas from Universitat Autònoma de Barcelona (UAB).
In the 52-page report, the authors note that based on an in-depth analysis of representative data on crypto owners:
We refute the hypothesis that cryptocurrencies are being sought as an alternative to fiat currencies or regulated finance … investors in cryptocurrencies are no more concerned about the safety of cash or commercial banks than the rest of the population.
The study also found, “Cryptocurrency investors are typically educated, young and male. People who have experience using digital finance are more likely to invest in cryptocurrencies. “
The authors stress that investors continue to view cryptocurrencies as “a niche digital speculation object” and stated that “a clear regulatory and supervisory framework for cryptocurrency markets can be beneficial to the industry”. They added:
From a political perspective, the general understanding of our analysis is that investors’ goals are identical to those of other asset classes, so regulation should be like that too.
The report stresses that “better regulation can also be beneficial to the industry – even fundamentally”.
It will then be discussed “to regulate this asset class in a technology-neutral manner and at the same time use the potential of the technology itself in the supervisory process”. The authors suggested:
One promising option that regulators and regulators could pursue is “embedded supervision” … The main objective is low-cost oversight of decentralized markets, which could be particularly relevant given recent considerations about the need for adequate supervision of the cryptocurrency industry.
By embedded supervision, “we mean the implementation of a supervisory framework for cryptocurrencies that enables compliance to be monitored automatically by reading the market book,” the report clarifies.
What do you think of the results of the BIS report? Let us know in the comment section below.
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