Namaste Yogis. Welcome to the Blockchain & AI Forum, where your blockchain and artificial intelligence technology questions are answered! Here no question is too mundane. As a bonus, a proverb is also included. Today’s question, was submitted by Rufus and he wants to know whether the Bank for International Settlement (BIS) provided an honest assessment of decentralized finance in their recent report, titled Project Atlas? https://www.bis.org/publ/othp76.pdf
Rufus, you came to the right place. Correct, the BIS did produce Project Atlas, a report that purports to “map out” the world of decentralized and crypto finance. Project Atlas was released October 2023 by the BIS’s “Innovation Hub”. Let’s assess their creditability but first a short description of the BIS.
BIS is headquartered in Switzerland. BIS is the bank used by central banks to settle transactions. Holy epidemy of centralized finance Batman! BIS says it facilitates international monetary cooperation, financial stability and provides banking services to central banks across the globe.
BIS has an office dedicated to financial innovations. However, their Innovation Hub did not feel compelled to create decentralized finance. Given BIS is the epidemy of concentrated finance and its corresponding power, I suppose decentralized finance was not a priority innovation.
BIS says the rise of decentralized finance poses threats and risk. The BIS is correct. There are threats, there are risks. The more important questions are, who is threaten and who is at risk by the rise of decentralized finance and crypto?
According to BIS, central bank regulators are becoming increasingly apprehensive about the scale of crypto markets and their integration with traditional finance. I can’t help but point out BIS believes research integrity starts by asking central bankers if decentralized finance is a problem! Why not ask central bankers if centralized banking is a problem or what are the problems with centralized banking? Sorry, for the rude observation Batman! And, although commercial banks have minimal exposure to crypto markets say the BIS, they are nevertheless nervous. If that sounds contradictory you are not alone. Let’s move on.
BIS cites failure of two crypto projects, FTX and Terra, as examples of the “pitfalls” of unregulated finance markets but fails to note neither required taxpayer bailouts. In other words, decentralized finance poses a threat and risk because business failure is punished with financial loss not rescued by middle class taxpayers. Perhaps BIS has a right to fear the public asking, “why when decentralized finance fails there are no taxpayer bailouts but when traditional finance fails, we are stuck with the bill?” That indeed is a threat and risk.
BIS says the gaps in their ability to collect decentralize finance data is a threat and risk. BIS says:
Project Atlas seeks to answer the question: how can central banks harness technologies to gain insights into DeFi markets and gather more reliable and comprehensive statistics on crypto ecosystems?
In other words, BIS, and fellow compadres, want to maintain control. Their innovation hub consists not to create new technology offering greater freedom; their innovation hub is dedicated to researching how to extend and maintain the incumbent system; a system they own and employ to control the world’s financial system. Holy transparent agenda Batman!
I will cease but not before pointing out Project Atlas true innovation is it shows centralized finance is threaten by crypto and decentralized finance. That’s a big deal.
Time to hit the road, but first a proverb from Paraguay: If it doesn’t rain it doesn’t leak, says the man with a damaged roof.
Until next time,
Yogi Nelson
Blockchain & AI Forum 