Regulations Impacting Banks Using Permissionless Blockchains: Insights from BIS
Understanding the Risks Faced by Banks Using Permissionless Blockchains
Regulations are increasingly shaping the landscape for financial institutions utilizing permissionless blockchains for transactions. The Bank for International Settlements (BIS) and its Basel Committee have raised alarms over potential risks such as money laundering and terrorism financing.
Key Risks Identified by the Basel Committee
- Money Laundering: Banks are potential targets for illicit activities if proper safeguards are absent.
- Terrorism Financing: The use of crypto in transactions raises flags for regulatory oversight.
- Zero-Knowledge Proofs: While promising for privacy, they can complicate compliance with existing regulations.
- Distributed Ledgers (DLT): The technology poses unique risks that traditional systems may not address.
Implications for Financial Institutions
As banks navigate these regulations, they must consider the balance between adopting innovative technologies like blockchain and ensuring compliance. The BIS prioritizes guidelines to address these challenges, but the path is fraught with complications.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.