20th April 2025 > > BIS.

tl;dr

One of the world’s failing supranational organisations lays bare its prejudice against cryptos.

Market Snap

Market Wrap

The long weekend provides us with little action to talk about.

Curious Cryptos’ meme corner – Yep

Curious Cryptos’ Commentary – Some governments are accumulating BTC

To the tune of 2.5% of total supply (ignoring lost coins):

h/t The Milk Road

Curious Cryptos’ Commentary – Bank for International Settlements (BIS)

BIS was initially set up in the aftermath of WWI to handle the reparation payments due from Germany as agreed in the Versailles Treaty. Like all bureaucratic organisations that do not have to answer to shareholders, nor the electorate, it has expanded its remit, and its headcount with all the attendant salaries and pensions paid to unsackable employees, far beyond what was ever contemplated when it was created. The image you have in your head of greedy pigs sticking their noses in the trough of money we chuck at the BIS is perfectly encapsulated in its current head Agustin Carstens. Oh, and don’t forget that employees of BIS pay ZERO income tax on their earnings plus allowances, which in Carsten’s case amounts to a tidy one million dollars without including the value of his pension rights.

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Commonly referred to as the Central Bank for Central Banks, can you hazard a guess as to its stance on cryptos and the devil’s child, CBDCs?

To the uninitiated, one might expect that the most important central bank in the world, the Fed – which is anti-CBDCs – would hold great sway. One might also expect that the Swiss National Bank, the country hosting the BIS, and which is also anti-CBDCs, gets a voice too.

But of course, you would be wrong. The BIS is very much aware that cryptos pose an existential challenge to its very existence, and technocrats like Carsten are unwilling to lose their privileged positions lightly, however undeserving they are.

Adding to its previous “research” BIS has issued a new report titled “Cryptocurrencies and decentralised finance: functions and financial stability implications”:

https://www.bis.org/publ/bppdf/bispap156.htm

The opening chapter, which aims to give an overview of blockchain technology, and the history of BTC in merely a few paragraphs, twice makes space for derogatory comments about crypto investing and crypto investors, highlighting the authors’ personal prejudices:

“Some early adopters amassed significant wealth, while many retail investors faced substantial losses.”

“Where cryptocurrencies have proven to be successful is in encouraging speculation.”

The latter comment is justified with a graph showing that increased users correlate with increased prices. Anyone with a fleeting knowledge of the value of networks recognises that the size of the user base, and the frequency of use, drives the value of that network. But the BIS stoutly ignores such commonsense, for it does not fit the narrative it wishes to portray.

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The next chapter is an exploration of DeFi. After a promising start (“DEX’s are arguably the most successful type of DeFi protocols”) the authors then demonstrate a stunning level of ignorance, suggesting that they have not researched DeFi at all, or the concept is so far removed from their comfortable centralised world, they simply cannot internally process what DeFi means:

“Early DEX protocols required liquidity providers to offer liquidity across all price ranges, regardless of market conditions.”

Er, no. This is simply not true.

“More modern versions of DEXs allow for much more sophisticated strategies for liquidity provision. These protocols … involve providing price information to coordinate decentralised decision-making.”

Er no, this is simply not true.

All DEX utilise a form of AMM (automatic market maker), a concept first visualised by Vitalik himself. Each protocol will have its own form of AMM, but they all share one key characteristic. The price outcome of swapping one crypto for another is pre-determined by code that accounts for the liquidity in the pool, and the size of the trade. This is not a difficult concept to grasp, raising serious questions about the authors’ credibility and motivation.

And once again, the authors’ prejudice is laid bare for all to see:

“So far, DeFi has mainly been used for speculation on the value of the token issued with new protocols.”

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The section on stablecoins (which should be a key part of any analysis by BIS) is short and lacking rigour. It makes the mistake of conflating fiat-backed stablecoins with algorithmic stablecoins, again indicating that the depth of research by the authors is shallow at best. CBDCs raise their ugly head, but we have no interest in the BIS support for this tool of oppression so we shall not dawdle here.

The largest section is devoted to justifying the need for regulation, almost as if this was in doubt. Nobody, apart from the occasional maxi whom we always ignore, is against crypto specific regulation, so again we can safely move on.

Under “A conceptual framework for financial stability implications” there is this intriguing comment:

“The issue is to correct market failures so as not to chokeoff potentially useful innovations, while at the same time reducing risks for market participants and the financial system as a whole.”

I had to stop myself and read that several times over, for its sounds suspiciously like support for cryptos from BIS, which would be a first. But technocrats are masters at saying one thing and meaning another, their only skill. The devil in the detail is that use of “potentially useful innovations”. If you are anti-crypto, which aptly describes the stance of BIS, then the population of “potentially useful innovations” is vanishingly small.

Finally, the recommendations regarding regulation are opaque, non-specific, and largely unactionable. The only point of note is that the report recommends further research, presumably to be done by BIS itself, perpetuating its pointless existence.

Christian Catalini sums it up better than I on X:

“Think: writing parking regulations for a fleet of self‑driving drones — earnest work, two technological leaps behind.”

Never forget, this is the type of stuff your taxpayer dollars get wasted on.