In its continued efforts to identify the ideal future monetary system, The Bank of International Settlements (BIS) revealed the edge of the crypto ecosystem over the present-day fiat economy when it comes to fulfilling the policy goals.
While sharing its vision for the future monetary system, the BIS outlined eight high-level goals it hopes to achieve — safety and stability, accountability, efficiency, inclusion, user control over data, integrity, adaptability and openness. In its study, BIS found the crypto ecosystem outweighs the traditional finance when it came to broadly fulfilling the policy goals.
The above table shared by the BIS shows that the current-day fiat economy is far from meeting the requirements of an ideal monetary system. The report awarded points to the fiat ecosystem for the safety and stability policy while highlighting that “public oversight has helped achieve safe and robust payment systems.”
The cryptocurrency ecosystem, however, broadly fulfilled two of the eight policies laid down by the BIS — adaptability and openness. In addition, the report suggested improvements in the inclusion and user control over data policies, which would result in the crypto ecosystem fulfilling half of BIS’ recommendation for an ideal monetary system.
The BIS currently banks on the rise of central bank digital currencies (CBDC) to counter the mainstream adoption of cryptocurrencies. Its vision for the future monetary system involves the use of multi-CBDC arrangements with new data architectures that provide better privacy and control while serving the unbanked.
The BIS Innovation Hub recently shared plans to launch a market intelligence platform as a reaction to the collapse of numerous stablecoins projects and decentralized finance (DeFi) lending platforms. The platform aims to serve as an alternative to unregulated firms for providing data on asset backing, trading volumes and market capitalization.
The Bank of Israel recently commenced its first technological experiment with a CBDC, which examined user privacy and the use of smart contracts in payments.
While the experiment was riddled with a myriad of technical issues, it also highlighted the need to establish a Know Your Customer and an Anti Money Laundering system through a centralized database.