BIS to build platform to assess the fallout from stablecoin collapses and DeFi projects

The BIS Innovation Hub will develop a platform to assess the economic potential of stablecoins and crypto-lending projects, as well as the risks they pose to financial stability.

The move was prompted by the collapse of many ‘stablecoins’ and problems facing DeFi-protocol-linked firms.

Information on asset backing, trading volumes, and market capitalization is provided by unregulated firms on a voluntary basis. Separate datasets and commercially available solutions do not provide exhaustive information or ensure transparency. This creates difficulties for regulators, the document says.

The open-source platform will enable disclosure of the economic activity of such projects and the risks to financial stability.

BIS also announced an initiative to study post-quantum cryptography and to ensure the privacy of payment systems. The Hub will test potential solutions and assess their impact on performance.

BIS’s Hong Kong office, in partnership with the Bank of Israel and the Hong Kong Monetary Authority, will study cybersecurity issues related to retail CBDC.

In June 2022, the Innovation Hub, together with monetary regulators in France and Switzerland, announced a pilot of using a digital currency in cross-border settlements.

Earlier BIS head Augustin Carstens named central banks as the best source of trust in money in the digital age.

At the time, the BIS head referred to a recent BIS study, in which experts concluded that the decentralisation of DeFi services is illusory.

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