Cryptocurrencies resonate more with BIS vision of an ideal monetary system

In its ongoing effort to define the ideal future monetary system, the Bank for International Settlements (BIS) has revealed the advantages of the crypto ecosystem over today's fiat economy in terms of achieving policy goals.

In sharing its vision for the future monetary system, BIS outlined 8 high-level goals it hopes to achieve - security and stability, accountability, efficiency, inclusivity, user control over data, integrity, adaptability and openness sex. In its research, BIS found that the crypto ecosystem outperformed traditional finance in broadly achieving policy goals.

High-level objectives for the monetary system as set out by the BIS Source: BIS

The above table shared by the BIS shows that today’s fiat economy is far from meeting the requirements of an ideal monetary system. The report lists security and stability as plus points for fiat ecosystems, while emphasizing that “public oversight contributes to a secure and robust payment system.”

However, the cryptocurrency ecosystem basically achieves 2 of the 8 policies established by the BIS - adaptability and openness. Additionally, the report recommends improving data policy inclusivity and user control, which would allow the crypto ecosystem to meet half of the BIS’s recommendations for an ideal monetary system.

The BIS is now pinning its hopes on the rise of central bank digital currencies (CBDCs) to counter the mainstream adoption of cryptocurrencies. Its vision for a future monetary system involves the use of multiple CBDC arrangements, with new data architectures that provide greater privacy and control while serving unbanked users.

The BIS Innovation Center recently shared plans to launch a market intelligence platform in response to the collapse of numerous stablecoin projects and decentralized finance (DeFi) lending platforms. Designed as an alternative to unregulated firms, the platform provides data on asset backing, trading volume and market capitalization.

The Bank of Israel recently started its first trial of CBDC technology, examining user privacy and the use of smart contracts in payments.

While the trial was fraught with numerous technical issues, it also highlighted the need for a know-your-customer and anti-money laundering system through a centralized database.