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Crypto fits better with BIS’s vision of the ideal monetary system

In its continued effort to identify the ideal future monetary system, the Bank for International Settlements (BIS) has demonstrated the advantage of the crypto ecosystem over today’s fiat economy when it comes to meeting policy goals.

While sharing its vision for the future monetary system, the BIS outlined eight overarching goals it hopes to achieve – security and stability, accountability, efficiency, inclusion, user control over data, integrity, adaptability and openness. In its study, the BIS found that the crypto ecosystem outweighs traditional finance when it comes to broadly meeting policy goals.

Overarching objectives of the monetary system as defined by the BIS. Source: BIS

The table above, shared by the BIS, shows that today’s fiat economy is far from meeting the requirements of an ideal monetary system. The report awarded points for security and stability policies to the fiat ecosystem, emphasizing that “public oversight has helped achieve secure and resilient payment systems.”

However, the cryptocurrency ecosystem largely met two of the eight guidelines set out by the BIS – adaptability and openness. In addition, the report suggested improvements in inclusion and user control over data policies, which would result in the crypto ecosystem meeting half of the BIS recommendation for an ideal money system.

The BIS is currently betting on the rise of central bank digital currencies (CBDC) to counter the mainstream adoption of cryptocurrencies. His vision for the future monetary system involves using multi-CBDC arrangements with new data architectures that offer better privacy and control while serving those who are unbanked.

The BIS Innovation Hub recently shared plans to launch a market research platform in response to the collapse of numerous stablecoin projects and decentralized finance (DeFi) lending platforms. The platform aims to serve as an alternative to unregulated companies to provide data on asset backing, trading volume and market capitalization.

Related: The Bank of Israel is experimenting with smart contracts and privacy in central bank digital currencies

The Bank of Israel recently launched its first technological experiment with a CBDC that explored user privacy and the use of smart contracts in payments.

While the experiment was riddled with myriad technical issues, it also highlighted the need to set up a know-your-customer and anti-money laundering system via a centralized database.