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 (6).png

Research

In recent months, a number of highly accretive developments were implemented across the protocol to improve fee capture, expand product functionality, and ultimately drive value accrual to the RUNE token, with more upgrades on the immediate horizon. These developments include hiking the minimum swap fee parameter to increase revenue, adding a Burn System Income Lever to reduce the RUNE supply, the addition of COSM-WASM smart contracting and IBC to enable an application layer, new chain integrations, and more.

article-image

Delta comes out of stealth with $11 million in funding, and some novel ideas

article-image

HBO documentary Money Electric presents a fun theory that sadly falls flat

article-image

Has Satoshi Nakamoto been here the whole time, working on Bitcoin Core?

article-image

The same tokens were also named as securities in the SEC’s lawsuits against Coinbase and Binance

article-image

Kaito AI said Monday that memecoin mindshare is now at a yearly high

article-image

Plus, Celestia looks about to flip Ethereum data availability usage