BIS: Encryption and Decentralized Finance have reached a "critical scale" and we must be vigilant about financial stability risks.

The Bank for International Settlements (BIS) has released a report stating that Crypto Assets and Decentralized Finance (DeFi) have reached a “critical scale,” beginning to pose potential risks to the TradFi system. The report points out that Bitcoin Spot ETFs, the expansion of stablecoins, and the tokenization of real assets are deepening the ties between the crypto market and TradFi. The report also warns that the crypto market may exacerbate wealth inequality, with small investors increasing their positions during market downturns while the wealthy exit early. BIS recommends adopting a “containment” strategy to push for DeFi’s integration into compliance frameworks such as KYC and information disclosure, and calls for further research on DAO governance, stablecoin risks, and the “cryptoization” of emerging markets. (LedgerInsights)