In a recent paper, economists from the Bank for International Settlements (BIS) proposed a compliance scoring system for cryptocurrencies based on their transaction history. This may impact the process of converting crypto assets into fiat currency.
The Idea of Scoring Cryptocurrencies Based on Transaction History
BIS economists suggested assigning a compliance score to each cryptocurrency, depending on its transaction history. This would help identify assets that have gone through wallets or protocols suspected of laundering stolen or illicit funds, lowering their score and subjecting them to stricter controls.
Potential Implications for Regulators
Under the proposal, national regulators could set minimum threshold scores for converting cryptocurrencies into fiat currency. If an asset's score falls below that threshold, exchanges in that jurisdiction would be barred from processing the conversion.
BIS Warns About Risks of Cryptocurrencies
BIS believes this approach could deter the flow of illicit funds while boosting trust among institutional players and the broader financial sector. However, the institution maintains its cautious stance toward cryptocurrencies, warning that digital assets remain volatile and could pose threats to financial stability.
The BIS proposal could represent a significant step towards enhancing cryptocurrency market transparency and combating money laundering, though it requires careful consideration of its overall impact on the sector.
