Crypto but better – Central bank digital currency (mnbc extension) has become a major topic in the cryptographic environment. Lately, we’ve seen the UK Parliament position itself favorably a digital poundAnd or Brazil takes a big step forward a true digital. For specific reasons of each nationMNBCs could become a financial instrument unavoidablethat is why in the end it was logical that they end up worrying the instance of coordination central banks, namely the Bank for International Settlements (BIS). The latest newsletter from the Basel institution addresses these issues by mnbc extension through the prism of the systemic dangers associated with cryptocurrency. Explanations.
The Bank for International Settlements has a negative view of Bitcoin and cryptocurrencies
The bank for international settlements is an organization responsible for cooperation between national central banks and global financial stability. Based in Switzerland, it brings together 63 nation and its recommendations are carefully examined by local and international authorities. Its newsletters are published several times a year and the latest, number 66, is about the crypto and the mnbc extension.
Matthew AquilinaBIS chief economist, analyzed the events recent of the cryptocurrency market and learned the following lesson:
“Recent failures in digital asset markets underscore the need to address the risks presented by cryptocurrency before these markets become systemic. »
Not just the exchanges Centralized and decentralized cryptocurrency sharing vulnerabilities with traditional finance (TradFi), but in many ways they are even more fragile. Effect of the sinkproblems liquid assets or even the asymmetry in theinformation they are all dangers inherent in the industry.
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The international institution is evaluating different responses to the crypto-threat
Faced with this reality and the fact that “cryptocurrency will not go away by itself”the BIS is considered three axes of reactions possible to protect the consumerthe market and the stability financial world: prohibit, contain and regulate.
To prohibit it is attractive, because it protects the international financial system and consumers. But this option goes against certain founding principles of companies and stop to take advantage of cryptocurrency-related innovations. Also, it looks like an outright ban vscomplicated to implement.
To contain isolating cryptocurrency-related businesses from the rest of the market is the second option. This would allow you to take advantage of innovations in limiting the risks. The idea would be to create a firewall between the two markets, but the implementation is, again, complicated. Nor would it avoid possible risks to the consumer or to financial stability.
In the end, the last option is regulation. It would be applying the same type of tools to control that for TradFi in Mapping precisely the high-risk areas in CeFi and especially in DeFi. But the outlines of this solution are currently vague and uncertain due to the opacity of DeFi and in particular its potential points of contact with TradFi.
…and ultimately favors central bank digital currency (MNBC)
Finally the BIS consider a middle ground that simultaneously takes on the strengths of each option. Here is an overview of the conclusions that lead directly to the mnbc extension :
“Central banks could encourage innovation in TradFi to contribute to a more efficient monetary system. (…) Some areas of cryptography could be exploited to improve the way services are provided. [Les MNBC] it could help reduce the cost of payments, improve financial inclusion, strengthen system integrity, and promote user control over data and privacy. »
The BIS would like everything benefits of crypto while maintaining all those of a classic central bank currency. For this the mnbc extension they are the new favorite tool of these international institutions. We will see how each country takes its recommendations into account. But Russia, excluded from the BRI by the outbreak of war in Ukraine, has already come to the same conclusions.
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