Cardano proposes revising BIS standards to foster operational resilience and innovation through decentralized infrastructures.
Cardano Questions BIS Standards on Third-Party Risk
Cardano has raised concerns about the Bank for International Settlements’ (BIS) third-party risk management principles, arguing they limit blockchain use. According to Cardano’s report, the BIS’s current centralized framework restricts decentralized technologies, including public blockchains, which offer operational and risk management advantages.
In our latest article, we share suggestions for making @BIS_org’s third-party risk principles less focused on centralized models. We advocate for tech-neutral regulations to empower decentralized models and unlock blockchain’s potential. 🌐 Read more: cardanofoundation.org/blog/increasin…
BIS Guidelines and Centralized Models
The BIS sets global regulatory principles, influencing how financial institutions manage third-party risks. These standards typically favor centralized services with identifiable counterparties. This approach, Cardano argues, discourages innovation and prevents financial institutions from exploring the benefits of decentralized systems.
Advantages of Decentralized Infrastructures
Cardano highlighted several benefits of decentralized technologies in financial systems:
- Eliminating single-entity dependency
- Enhancing resilience and transparency
- Reducing costs and barriers to entry
- Promoting composability through open-source development
Unlike traditional frameworks, decentralized systems operate without central entities, which challenges traditional risk management methods.
Proposed Alternative Approaches
Cardano suggests alternative strategies for managing risks in decentralized environments:
- Infrastructure and code evaluation: Ensuring robust design and security.
- Collective risk assurance: Leveraging community participation to offset risks.
- Direct involvement: Financial institutions can engage by running nodes and participating in governance.
These methods could mitigate risks while allowing institutions to benefit from decentralized innovation.
Recommendations for Tech-Neutral Guidelines
Cardano has proposed revising BIS principles to support a more resilient and innovative financial framework:
- Promote technological neutrality by avoiding biases toward centralized models.
- Adopt alternative risk management methods tailored to decentralized systems.
- Encourage institutional participation in blockchain governance and operations.
This shift, Cardano believes, will unlock blockchain’s potential while ensuring financial system resilience.
Call for Change
Cardano emphasizes the need for financial markets to embrace diverse architectural choices free from regulatory constraints. The report states:
“Open and diverse financial markets should empower institutions to make architectural choices based on their unique needs.”
This approach, Cardano argues, will foster competitive innovation while ensuring operational resilience.
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