A System Reaching Critical Mass

In its April 15, 2025 report, BIS noted that crypto and DeFi have reached “critical mass” in terms of capital and users, posing growing regulatory and economic concerns.

Stablecoins, in particular, have become essential to crypto value transfers. However, the report argues they need stricter rules to guarantee dollar redemptions during market stress.

Urging Stronger Regulation

BIS supports efforts like the STABLE Act passed in the U.S. House Financial Services Committee, which aims to enhance transparency and consumer protection in the stablecoin sector.

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The GENIUS Act, also mentioned, seeks to enforce collateral requirements and Anti-Money Laundering compliance among stablecoin issuers.

Rich Get Richer?

Citing events like the 2022 FTX collapse, BIS warned that crypto often functions as a wealth transfer mechanism from small investors to large holders (“whales”).

“Retail users were buying while whales were selling — this is not financial inclusion, it’s reverse redistribution,” the report said.

Though similar in economic function to TradFi, DeFi’s unique traits — like smart contracts and modular design — require proactive, specialized regulation to avoid systemic risks.

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BIS Report ‘Dangerous’ and Misinformed

Referring to the April 15 BIS paper on crypto and DeFi, Perkins claimed the report reflects fear, arrogance, or ignorance — and poses a threat to global financial stability.

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“Crypto is not communism. It’s the new internet. You cannot control it any more than you can control the web.”

Real-Time Crypto vs 9-to-5 Banking

Perkins warns that BIS’ “containment” approach could backfire, leading to systemic liquidity risks as crypto operates 24/7 while traditional markets shut down after hours.

“These recommendations will create the very risk they seek to prevent.”

Anonymity Isn’t Unique to Crypto

Responding to BIS’ concerns about anonymous DeFi developers, Perkins points out the double standard:

“When was the last time a TradFi firm published its developer list?”

He also rebuts BIS’ alarm over stablecoins and their role in developing economies:

“If USD stablecoins help people in Venezuela or Zimbabwe, isn’t that a net positive?”

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Mandala uses zero-knowledge proofs (ZK-proofs) to enable participating banks to process transactions in compliance with specific regulations. The system processes the necessary data for transaction compliance through a dedicated peer-to-peer messaging network between the parties, enabling automatic compliance checks against relevant policies. Zero-knowledge proofs allow parties to audit transactions while preserving data privacy by keeping transaction details confidential.

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BIS is optimistic about the early results of the project. Maha El Dimachki, Head of BIS Innovation Centre Singapore, said Mandala is playing a pioneering role in improving cross-border payments without compromising privacy with its “compliance by design” approach.

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General Manager of BIS Agustín Carstens warned in a speech at the BISIH-FSI conference in Switzerland today that outdated legal frameworks in different jurisdictions could hinder the development of CBDCs.

Carstens said, “It is absolutely unacceptable for uncertain or outdated legal frameworks to hinder their implementation.” Also he concluded his words by saying, “Work to address these issues needs to begin seriously and progress quickly.”

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Call for a More Advanced Legal Framework from BIS

Carstens emphasized that the current monetary system needs to evolve. He also stated that central banks are actively researching CBDCs to encourage innovation. But he said central banks alone cannot achieve the transformation they want.

Along with this, Carstens referred to the 2021 IMF document and said that about 80% of central banks either cannot issue digital money based on existing laws or have uncertain legal frameworks.

In contrast, the published BIS survey revealed that 93% of central banks are actively involved in various aspects of CBDC development. This indicates that legal frameworks lag behind the progress made by central banks in the CBDC field.

Carstens noted that the legitimacy of CBDC comes from the legal authority of the central bank to issue it. He added, “This authority needs to be firmly based on laws.” He highlighted the importance of legal frameworks that support the legitimacy of money by mentioning that money is a social structure.

“Money cannot operate without law,” he added.

Carstens called for legal frameworks in the jurisdiction to be able to work together with other jurisdictions. “If we end up with a fragmented system and legal framework where different digital currencies do not work together, it would be an unfortunate situation,” he added.

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