The BIS report suggests "containing" encryption risks igniting industry anger: Is DeFi really that dangerous?

The Bank for International Settlements (BIS) recently released a new report on crypto assets and Decentralized Finance (DeFi), advocating for a "containment-style" regulatory strategy to prevent systemic risks to the traditional financial system (TradFi). This move immediately sparked a strong Rebound from the crypto industry, directly labeling the report's content as "dangerous and ignorant."

ETF and RWA blur the boundaries with TradFi

The BIS report titled "Crypto Assets and Decentralized Finance: Functions and Implications for Financial Stability" points out that as trends such as cryptocurrency ETFs and the tokenization of physical assets rise, the connection between the crypto industry and TradFi is deepening.

The report believes that while such developments have innovative potential, they also bring about potential risk spillover effects. The authors of the report wrote: "In terms of prudent regulation, the goal is to prevent the risks generated by encryption and DeFi from spilling over to critical financial sectors and the real economy, thus adopting a 'containment' strategy is necessary." However, at the same time, the report also acknowledges that a complete ban on crypto assets "is neither ideal nor feasible."

("The above translation is provided by 'Immersive Translation', with parameters DeepSeek, Web3 Translation Master, free activation: , enter promo code: ABMedia2025, to enjoy a 10% discount on the professional version ) BIS points out the three major risks in the crypto industry: information asymmetry, anonymous operations, and ongoing fraud.

The most controversial part of the report is its emphasis that while the structure of encryption and Decentralized Finance is open and transparent, consumers still face the problem of information asymmetry. "Due to the diverse and novel products in the DeFi space, consumers find it difficult to distinguish based on quality. Fraudulent projects often manage to exist for a long time and are hard to detect."

In addition, the report also pointed out that the anonymity of blockchain reduces the reputation risk for participants, "therefore encouraging practitioners to take on higher risks," especially in the absence of real-name verification and regulatory standards.

BIS recommends strengthening regulation: KYC, information disclosure, and qualification review are indispensable.

As DeFi begins to perform functions similar to traditional finance, such as lending, asset management, and trading matching, the BIS argues that this industry should also adhere to the regulatory standards of traditional finance. The report suggests including:

Establish a more transparent information disclosure system

Require the operator to implement KYC (Know Your Customer) mechanism.

Set minimum professional qualification standards to protect user rights.

The crypto industry responds fiercely: This is not regulation, but a fear-driven crackdown.

The report from the BIS was immediately met with strong criticism from several heavyweight figures in the industry. Christopher Perkins, President of CoinFund, harshly criticized the report on X as "completely out of touch with reality, and even dangerous."

He wrote: "Many of their suggestions and conclusions may stem from fear, arrogance, or ignorance; they are not only incorrect but may also exacerbate rather than reduce systemic risk."

Perkins simultaneously refuted the accusations of information asymmetry in the report regarding DeFi. He emphasized: "Open-source and transparent code is a significant advancement compared to the black-box operations of the current financial system."

Curve founder responded bluntly: "Boycott this damn thing"

The founder of the decentralized trading protocol Curve, Michael Egorov, summarized his attitude towards the BIS report in one sentence: "Boycott this sh-t."

This article suggests that the BIS report "encircles" encryption risks, igniting industry anger: Is DeFi really that dangerous? First appeared in Chain News ABMedia.