Crypto bans in emerging economies might be unenforceable, warns Bank of International Settlements

In a recent paper, the BIS highlighted potential risks associated with how crypto interacts with emerging economies

article-image

Jack_the_sparow/Shutterstock modified by Blockworks

share

The Bank of International Settlements (BIS) believes that cryptocurrencies in emerging economies should be assessed with risk and regulation because they’ve been seen as a cheap and simple solution for financial challenges. 

In a recent paper, the BIS highlighted potential risks associated with how crypto interacts with emerging economies. The bank also offered guidelines for these economies to help them regulate crypto effectively and protect their citizens.

Crypto is technology dependent, the BIS noted, saying that emerging economies could be at risk for cyber-related attacks due to “relatively low and unequal technological development.”

Mixing technological concerns with a lack of financial literacy could create a worrisome cocktail, as there’s an inherent need to understand both components. 

“This can lead to a range of issues such as high levels of debt, improper investment choices and vulnerability to predatory practices,” while the lack of financial literacy can lead to “shocks.” 

The BIS pushes for emerging economies to take account activity and entity-based regulation into account. Essentially, an activity-based regulatory structure aims to regulate ”a systemically important activity directly, by constraining entities in their performance of that activity alone.” 

However, entity-based regulation primarily targets the entities carrying out the activities that the economy seeks to regulate.

“The combination of activities leads to a mix of risks, including liquidity transformation and leverage,” the BIS warned. 

It did note that there could be a compromise of the two regulatory approaches, which would ensure that crypto entities could beef up their war chests during bullish cycles to prepare for possible downturns.  

A blanket ban on crypto “might not prove enforceable” due to the “offshore” nature of crypto, the BIS warned. It would also make the markets less transparent as policymakers would “lose all sight of these markets.”

International coordination is one of the top suggestions the BIS makes, but it’s not a new suggestion. Across the world, regulatory bodies and policymakers are looking into how joint collaborations could help crack down on crypto crimes, while also monitoring developments across crypto.

Read more: IRS deploys attachés as countries acknowledge global need for crypto crime regulation

“A potential next step may be for authorities to collaborate on the establishment of a shared data repository where key information such as crypto-related activity and exposures of financial institutions, among others, would be stored,” the BIS suggested. 

Outside of regulatory frameworks, the BIS is also focusing on how central bank digital currency (CBDC) systems could interact with economies, noting that 93% of banks are exploring potential CBDCs.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates (1).jpg

Research

With $13B in tokenized assets, strong institutional partnerships, and a clear first-mover advantage in the RWA space. The platform's methodical approach to regulatory compliance, coupled with its hybrid public-private architecture, positions it uniquely to capture significant market share in the emerging tokenization landscape. While current fee generation primarily stems from metadata transactions, the planned launch of Figure Markets, major exchange listings, and comprehensive market-making initiatives in 2025 could serve as powerful catalysts for growth.

article-image

Perena is built on the premise that as stablecoins proliferate, liquidity could fragment, and stablecoins aren’t useful if they aren’t liquid

article-image

From hackathons to trading tools and DAO governance, AI agents are redefining how we build and innovate

article-image

CME’s large bitcoin contracts are so big that investors are turning to micro bitcoin contracts

article-image

The third-largest stablecoin is going multichain for the first time in its seven-year history

article-image

Nano Labs’ news release notes confidence in bitcoin being “a reliable store of value amidst its rising global adoption”

article-image

Several big companies report third quarter earnings this week, likely moving markets